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Author: 


Mills,  Frederick  Cecil 


Title: 


A  statistical  analysis  of 
the  tax  burden  on... 

Place: 

Albany 

Date: 

1922 


MASTER    NEGATIVE   # 


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Business 

D653  Mills,  Frederick  Cecil,    1892- 

M62  ...  A  statistical  analysis   of  the  teuc  burden 

on  corporations   in  the  State  of  New  York;  being 
Part  II  of  the   1922  report  of  the  special  joint 
legislative  committee  on  taxation  and  retrench- 
ment of  the  State  of  NovrYork...  AlbarQr,   Lyon, 
1922. 

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SCHOOL  OF  BUSINESS 

A  Statistical  Analysis  of  the  Tax 

Burden  on  Corporations  in 

the  State  of  New  York 


BEING  PART  II  OF  THE  1922  REPORT  OF  THE 

SPECIAL  JOINT  LEGISLATIVE  COMMITTEE 

ON  TAXATION  AND  RETRENCHMENT 

OF  THE  STATE  OF  NEW  YORK 


't 


ALBANY,  JANUARY  10,  1922 


ALBANY 

J.  B.  LYON  COMPANY,  PRINTERS 

1922 


6(L 


PART  TWO 


wsine^S 


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Mgx 


A  Statistical  Analysis  of  the  Tax 

Burden  on  Corporations  in 

the  State  of  New  York 


By  FREDERICK  C.  MILLS 


Object  and  Scope* 

Object  of  the  investigation. —  This  report  summarizes  the  re- 
sults of  an  investigation  undertaken  for  the  purpose  of  deter- 
mining the  relative  burden  of  present  taxes  on  corporations  in  Xew 
t^ork  State.  Under  the  existing  laws  different  types  of  corpora- 
tions are  taxed  on  different  bases.  Some  pay  in  proportion  to 
their  net  income.  Others  are  taxed;  on  their  gross  earnings 
or  excess  dividends.  Taxes  on  certain  corporations  are  levied 
on  capital  stock,  or  on  capital,  surplus  and  undivided  profits. 
Combined  with  these  varying  classifications,  which  cut  across 
each  other  in  diverse  ways,  are  general  property  taxes  and  special 
franchise  taxes.  The  complicated  character  of  the  corporation 
tax  system  has  rendered  difficult  a  ready  comparison  of  the  burden 
of  taxes  on  different  classes  cf  corporations. 

An  attempt  is  made  in  the  following  pages  to  reduce  the  prob- 
lem to  quantitative  terms,  on  a  common  basis,  in  order  that 
effective  comparison  may  be  possible. 

Specifically,  the  following  have  been  the  ends  in  view : 

1.  The  compilation  of  available  data  on  the  capital  and  income 
of  different  types  of  corporations  in  "New  York  State.  Where 
complete  aggregate  figures  could  not  be  obtained,  representative 
samples  were  studied. 

2.  The  assembling  of  all  available  information  concerning  the 
amounts  paid  in  taxes  to  the  State  of  ^N^ew  York  under  existing 
laws  by  different  classes  of  corporations. 

3.  The  determination  of  the  burden  of  general  tax  charges  upon 
different  classes  of  corporations.  To  facilitate  comparison,  tax 
payments  have  been  reduced  to  a  common  basis,  in  so  far  as  this 
was  possible. 

4.  The  determination  of  the  burden  of  specific  taxes  upon  the 
different  classes  of  corporations  paying  them. 


*  The  Committee  desire  to  acknowledge  the  aid  which  has  been  given  in  the 
preparation  of  this  report  by  the  office  of  the  Commissioner  of  Tntorcal  Revenue, 
Washington,  D.  C,  the  Tax  Commission  and  the  Public  Service  Commission  of  the 
State  of  New  York,  the  office  of  the  Superintendent  of  Banks  and  the  office  of  the 
Comptroller  of  the  State  of  New  York.  The  heads  of  these  departments  and  the 
members  of  their  staffs  have  rendered  valuable  assistance  in  this  work. 

Special  acknowledgm^'nt  should  be  made  of  the  valuable  services  rendered  bv 
Mr.  Donald  H.  Davenport.  A  member  of  the  Staff  of  the  Committee  since  the  in- 
ception of  the  work,  he  has  assisted  in  the  administration  of  the  entire  investiga- 
tion and  in  the  anal.vsis  of  the  results. 

[5] 


6 


5.  The  assembling  of  such  additional  material  as,  in  conjunc- 
tion with  the  above,  might  be  of  use  to  the  Committee  in  framing 
proposals  for  changes  in  the  tax  system  and  in  determining  the 
practical  effects  of  such  changes. 

Scope  of  study  and  sources  of  information.—  For  the  purpose 
of  this  study,  the  corporations  in  the  State  have  been  grouped  into 
three  general  classes,  with  minor  subdivisions.  These  classes  are : 
(1)  Mercantile  and  Manufacturing  Corporations  taxed  under 
article  9-a  of  the  tax  law;  (2)  Public  Service  Corporations; 
(3)  Financial  Institutions.* 

^  The  problem  of  dealing  with  the  iirst  group  has  been  relatively 
simple,  in  that  these  corporations  pay  a  straight  tax  of  4%  per 
cent  on  their  net  income.  The  essential  problem  has  been"' that 
of  reducing  the  complex  taxes  paid  by  the  other  two  groups  to 
such  terms  that  comparison  with  the  first  group  might  be  possible. 
Published  statistics  dealing  with  the  capital  and  income  of 
these  three  classes  of  corporations  in  New  York  State  have  been 
summarized  and  studied.  It  has  been  necessary,  in  addition,  to 
conduct  an  intensive  survey  of  all  banks,  trust  companies  and 
investment  companies  in  the  State,  and  of  a  representative  list 
of  public  service  corporations. 

The  sources  of  information  are  listed  in  detail  below: 

I.  General  sources,  all  classes  of  corporations. 
1.  United   States  Government  Departments. 

Treasury  Department;   Division  of  Internal  Revenue. 
Statistics  of  Income  —  1916,   1917,   1918. 

In  addition  to  the  published  statistics  of  the  Division  of  Internal 
Revenue,  the  Secretary  of  the  Treasury,  upon  the  request  of 
this  Committee,  prepaied  the  following  detailed  tables,  based 
upon  the  tax  returns  of  corporations  in  Xew  York  State: 
Table    1.     Showing   sources   of    corporate   income   and   nature   of 
deductions,  by  industrial  groups,   for  corporations   in  Xew 
York   State,   for  the  year    1918,   with  detailed   information 
for  the  following  sub-classes: 
Transportation  and  other  public  utilities: 
Steam  railroads. 
Electric  railways. 
Express  companies. 
Electric  light  and  power  companies. 
Gas  companies. 

Telephone  and  telegraph  companies. 
Water  works. 
All  other  public  utilities 
Total,  transportation  and  other  public  utilities. 

ance  companies  are  given  in  a  separate  section  below.     C/.  in/raf  pp    97  101 


Banking  and  related  business: 
National  banks. 
State  banks. 
Trust  companies. 
All    other    corporations    engaged    in    banking    and    related 

business. 
Total,  banking  and  related  business. 
Table   2.   Corporation   returns  —  Distribution  by   industries   for 

New  York  State,  for  the  year  1918. 
Table   3.   Aggr^ate   figures   for   banks   and   public   utilities   in 
New  York  State,  classified,  giving,  for  the  following  classes 
of  corporations: 
a.  Amounts  received  in  the  form  of  dividends  from  other 
corporations    subject    to    federal    income    tax,    in    the 
year  1918. 
6.  Amounts  received  as  non-taxable  interest  on  federal  bonds 
in  the  year  1918. 
Transportation  and  other  public  utilities: 
Steam  railroads. 
Electric  railwavs. 
Express  companies. 
Electric  light  and  power  companies. 
Gas  companies. 

Telephone  and  telegraph  companies. 
Water  works. 
All  other  public  utilities. 

Total,  transportation  and  other  public  utilities. 
Banking  and  related  business: 
National  banks. 
State  banks. 
Trust  companies. 
All    other    corporations    engaged    in    banking    and    related 

business. 
Total,  banking  and  related  business. 
Department  of  Commerce,  Bureau  of  the  Census. 

Census   of   Manufactures,    1909,    1914.      Advance   sheets   of    1919 

Census. 
Census  of  Electrical  Industries,   1907,  1912,  1917. 
Financial   Statistics   of   State,   1915,   1917. 

Taxation    and    Revenue    Systems    of    State    and    Local    Govern- 
ments,   1914. 
2.  New  York  State  Government  Departments: 

Reports  and  records  of  the  State  Tax  Commission. 
Reports  and  records  of  the  State  Comptroller. 

Figures  in  all  published  reports  have  been  analyzed  and  addi- 
tional information  has  been  secured  from  the  original  records 
in  the  files  of  the  Tax  Commission  and  the  Comptroller. 
II.  Additional  Sources  of  Information,  PuJilic  Service  Corporations. 

1.  Reports  and  records  of  the  United  States  Interstate  Commerce  Com- 

mission. In  addition  to  its  published  reports,  this  Commission 
permitted  the  Conunittee  to  utilize  its  valuation  figures  for  railroads 
in  New  York  State,  in  so  far  as  the  work  of  valuation  had  been 
completed. 

2.  Reports  and   records  of  the  Public  Service  Commission  of  the  State 

of  New  York. 
A  detailed  analysis  of  the  returns  to  this  Commission  by  public 
service  corporations  has  been  made.  All  public  utilities  in  the 
State,  the  returns  of  which  were  complete  for  the  ten-year 
period,  1911-1920.  have  been  included  in  this  study.  The  follow- 
ing is  a  classification  of  the  corporations  studied: 

Steam  railroads. 
Electric  railways. 


8  ! 

Telephone  and  telegraph  corporations. 
Gas  and  electric  corporations: 

a.  Electric  light  and  power. 

b.  Gas  and  electric    (combined). 

c.  Manufactured  gas. 

d.  Natural  gas. 

^  ^'fh«''V?.hH'%"*"-*'^'n ''^"'i'*^"^  ^^  ^"  ^^""^^  ^^««e  reports  with 
period  giM  Sir  ^°^^^«t^^re  eomplete  for  the  ten-year 
period  1911-1920,  was  circularized  in  order  that  certain  addi- 
tional information  might  be  obtained.  The  results  secured  are 
summarized  in  the  table  on  this  page.  securea  are 

III.  Additional  Sources  of  Information,  Financial  Institutions 
2   pfrj'f     ^^     records  of  the  Comptroller  of  the  Currenc^. 
2.  Reports  and  records  of  the  Superintendent  of  Banks,  State  of  Xew  York. 

For  the  purpose  of  obtaining  certain  material  in  addition  to  that  obtained 

BaScs    ?vf,l'T'^^'''-^'  ^"  ?"*^^"^^   ^-°^«'  State   Banks    Savn!^ 
Banks    Trust   Companies,   and   Investment   Companies   in   the   State 

Ta'^es^se"  T  the  tlv''r^V''''^'^'.''''  ^^^p'°-  *«  the  quesW 
naires  sent  to  the  public  utilities  and  financial  institutions  follows: 

Replies  to  Questionnaires 


Type  of 
Corporation 


National  banks .  . . 

State  banks 

Trust  companies . . 

Savings  banks .... 

Invest,  companies. 

Total 

Financial 

Institutions 

Steam  railroads . . 

Electric  railroads 

Telephone,  tele- 
graph and  cable 
companies 

Gas     and     electric 

companies 

Total 

PubUc 

Utilities 


'    Num- 
ber of 
corpor- 
ations to 
which 
ques- 
tion- 
naires 
were 
sent 


Cor- 
rected 
list  ex- 
cluding 
corpor- 
ations no 
longer 
in  oper 
ation 


Replies 

to 

first 

letter 

July, 

1921 


Totals 


495 
232 
100 
144 
35 

1,006 

50 
113 


89 
163 
415 


1,421 


490 
232 
100 
143 
30 

995 

48 
112 


82 
143 
385 


Per 

cent 
reply- 
ing 
after 
first 
letter 


Total 

Per 

replies 

cent 

after 

reply- 

second 

ing 

letter 

after 

August. 

second 

1921 

letter 

1,380 


235 
160 

60 
123 

12 

590 

13 
21 


26 

40 

100 


I 


690 


47.9 
69.0 
60.0 
86.0 
40.0 

59.3 

27.1 
18.75 


31.7 
28.0 
26.0 


50.0 


363 
182 

79 
138 

15 

777 

29 
45 


54 

93 

221 


Total 
replies 
after 
third 
letter 
Septem- 
ber, 
1921 


99s 


74.1 
78.4 
79.0 
96.5 
50.0 

78  1 

60.4 
40.2 


65.9 
65.0 
57.4 


Per 
cent 
reply- 
ing 
after 
third 
letter 


72.3 


458 
207 

97 
143 

27 

932 

39 
91 


68 
117 
315 


1,247 


93  4 
89.2 
97.0 
100.0 
90.0 

93.7 

81.2 
81.2 


82.9 

81.8 
81.8 


90.3 


With  very  few  exceptions,  the  financial  institutions  and 
public  service  corporations  called  upon  were  prompt  to  co-operate 
with  the  Committee  in  its  work. 

Summary  of  Amiual  Taxes  Paid  by  Corporations 

The  following  brief  outline  of  the  taxes  paid  by  the  different 
classes  of  corporations  operating  in  JSTew  York  State  will  serve 
as  a  background  for  the  later  discussion.  No  attempt  is  made  to 
explain  the  various  provisions  of  the  tax  law  in  detail. 


9 


A  —  Taxes  Paid  by  Business  Corporations. 

(The  term   "business   corporations"   covers   mercantile   and   manu- 
facturing corporations,   excluding: 

a.  Real  estate  corporations. 

b.  Holding   corporations. 

c.  Transportation  and  transmission  corporations. 

d.  Elevated  or  surface  railroads  not  operated  by  steam. 

e.  Waterworks  companies,  gas  companies,  electric  or  steam  heat* 

ing,  lighting  and  power  companies. 

f.  Insurance  corporations. 

g.  Banks.  State  and  national, 
h.  Savings  banks. 

i.  Trust  companies. 

j.  Investment  companies. 

See  article  9-a,  section  210,  Tax  Law). 

1.  Franchise  Tax  (article  9-a,  Tax  Law),  4%  per  cent,  on  net  income. 

(Minimum  tax  to  be  not  less  than  $10  and  not  less  than  one  mill 
upon  each  dollar  of  issued  capital  stock ) . 

(Definition  of  net  income:  "total  net  income  before  any  deduc- 
tions have  been  made  for  taxes  paid  or  to  be  paid  to  the  Gov- 
ernment of  the  United  States  on  either  profits  or  net  income 
or  for  any  losses  sustained  by  the  corporation  in  other  fiscal 
or  calendar  years  whether  deducted  by  the  (Government  of  the 
United  States  or  not."     Section  208,  article  9-a,  Tax  Law). 

2.  General  Property  Tax    ( articles  1-5  inclusive,  Tax  Law ) . 

(Business  corporations  are  taxable  on  real  property  and  certain 
fixed  equipment;    they  are  exempt  from  the  payment  of  taxes 
on    personal    property.      See    article    9-a,    sections    219-i,   219-j. 
Tax  Law). 
B  —  Taxes  Paid  by  Financial  Institutions. 

1.  State  and  National  Banks. 

a.  Bank  Stock  Tax  (article  1,  section  13,  article  2.  sections  23-24, 

Tax  Law ) . 
1   per  cent,   on   value  of  shares    (total  value   of  shares  equal 
to  capital,  surplus  and  undivided  profits). 

b.  General  Property  Tax    (articles   1-5  inclusive.  Tax  Law). 

(Institutions  paying  the  bank  stock  tax  are  taxable  only  on 
real  property;  they  are  exempt  from  the  payment  of  taxes 
on  personal  property.     See  article  2,  section  24-c). 

2.  Trust  Companies. 

a.  Franchise  Tax    (article  9,  section  188,  Tax  Law). 

1  per  cent,  on  capital,  surplus  and  undivided  profits  (based 
on  average  during  preceding  year ) . 

b.  General  Property  Tax. 

(On  real  property;  trust  companies  are  exempt  from  pay- 
ment of  taxes  on  personal  property.  See  article  9,  sec- 
tion 205.  Tax  Law). 

3.  Investment  Companies. 

a.  Franchise  Tax    (article  9,  section  188-a,  Tax  Law). 

1%  mills  for  each  dollar,  face  value,  of  capital. 
1  per  cent,  on  surplus  and  undivided  profits. 

b.  General  Property  Tax. 

(On  real  property;  investment  companies  are  exempt  from 
payment  of  taxes  on  personal  property.  See  article  9.  sec- 
tion 205,  Tax  Law). 

4.  Savings  Banks. 

a.  Franchise  Tax  (see  article  9,  section  189,  Tax  Law). 

1  per  cent,  on  par  value  of  surplus  and  undivided  earnings. 

b.  General  Property  Tax. 

(On   real   and  personal  property;    deposits   in   savings   banks 
'    exempt  from  taxation). 


c  — 


D  — 


10 

6.  Insurance  Corporations  and  Surety  Companies. 

a.  Franchise  Tax  (article  9.  section  187,  Tax  Law). 
1  per  cent,  on  excess  of  gross  amount  of  premiums  charged 

over   deduK-tions   allowed  by   law,   on   business  done  within 
this  State  during  previous  calendar  year. 

b.  General  Property  Tax    (on  real  and  personal  property). 
Taxes  Paid  by  Public  Service  Corporations. 

1.  St€am  Railroads. 

a.  General  Franchise  Tax    (article  9,  section  182,  Tax  Law). 

(Franchise  tax  is  based  upon  the  capital  stock  of  the  corpo- 
ration. Tax  rate  variable,  depending  upon  dividend  rate, 
relation  of  assets  to  liabilities,  and  average  price  of  stock 
sold). 

b.  Additional  Franchise  Tax   (article  9,  section  184.  Tax  Law). 

One-half  of  1  per  cent,  on  gross  intra-State  earnings  (not 
including  earnings  derived  from  business  of  an  interstate 
character ) . 

c.  Special  Franchise  Tax   (article  2,  sections  44-49,  Tax  Law). 

(Tax  Commission  annually  determines  valuation  of  special 
franchises  subject  to  assessment  in  each  city,  town  or 
village.  Final  equalized  valuation  is  the  assessed  valuation 
on  which  all  taxes  based  upon  special  franchise  are  levied 
by  local  authorities.  Tangible  property  situated  upon 
streets,  highways,  public  places  or  public  waters  in  connec- 
tion  with  the  special  franchise  is  taxed  with  such  franchise), 
a.  General  Property  Tax. 

(Real  and  personal  property,  excluding  that  which  is  assessed 
''''         special  franchises,  is  taxed  under  this  head). 

2.  Telephone  and  Telegraph  Companies. 

(Taxed  upon  same  basis  as  steam  railroads). 

3.  Elevated  or  Surface  Railroads  not  operated  by  steam 

a.  Franchise  Tax    (article  9,  section   185). 

1  per  cent,  on  gross  earnings  from  all  sources  within  the  State. 

3   per   cent,   upon   amount  of  dividends  declared   or   paid   in 

excess  of  4  per  cent,  upon  actual  amount  of  paid-up  capital. 

b.  Special   Franchise   Tax    (article   2,   sections  44-49,   Tax  Law). 

(Same  as  steam  railroads). 

c.  General  Property  Tax    (same  as  steam  railroads). 

4.  Other  Transportation  Companies    (taxed  upon  same  basis  as  steam 

railroad**). 

5.  Waterworks  Companies,  Gas  Companies,  Electric  or  Steam  Heating, 

Lighting  and  Power  Companies. 

a.  Franchise  Tax   (article  9,  section  186). 

One-half  of   1   per   cent,   on   gross   earnings   from  all  sources 

withm  the  State. 
3  per  cent,  upon  amount  of  dividends  declared  or  paid  in  excess 

of  4  per  cent,  upon  actual  amount  of  paid-up  capital. 

b.  Special    Franchise   Tax    (article   2.    sections  44-49,   Tax   Law). 

(Same  as  for  steam  railroads). 

c.  General  Property  Tax   (Same  as  steam  railroads). 
Taxes  paid  by  corporations  not  included  in  the  above  classes. 

1.  Realty  Companies. 

a.  General  Franchise  Tax    (article  9,  section   182.  Tax  Law). 

(Franchise   tax   based   upon   the   capital   stock   of  the  corpo- 
ration). 

b.  General  Property  Tax    (on  real  and  personal  property). 
1 2.  Holding  Companies. 

a.  General  Fi-anchise  Tax   (article  9,  section  182,  Tax  Law). 

b.  General  Property  Tax   (on  real  and  personal  property). 


General  Considerations 

The  summary  of  the  existing  corporation  tax  laws  of  Xew 
York  State,  presented  above,*  indicates  the  diverse  bases  ou 
which  corporations  are  taxed.  The  chief  object  of  the  present 
investigation  has  been  to  reduce  the  taxes  actually  paid  b^^  cor- 
porations to  a  common  basis  in  order  that  a  comparison  of  the 
relative  burden  might  be  facilitated. 

In  attempting  to  measure  the  relative  burden  of  taxes  a  double 
problem  is  involved.  In  the  first  place,  it  is  important  to  know 
how  a  system  of  taxation  affects  the  different  corporations  within 
a  given  group,  as,  for  ins-tance,  to  determine  whether  a  given  tax 
falls  most  heavily  upon  small  or  large  institutions.  It  is  also 
important  to  determine  the  relative  weight  of  the  tax  burden  on 
different  classes  of  corporations,  such  as  business  corporations, 
public  utilities  and  financial  institutions.  The  pages  immediately 
following  are  devoted  to  a  consideration  of  this  double  problem. 

!N'et  income  has  been  adopted  as  the  standard  best  adapted  to 
the  measurement  of  tax  burden. f  For  each  class  of  corporation 
an  attempt  is  made  to  express  the  amount  paid  in  taxes  as  a  per- 
centage of  net  income,  though  the  original  levy  may  have  been 
upon  an  entirely  different  base.  Inasmuch  as  business  corpora- 
tions in  New  York  State  are  now  taxed  upon  net  income,  the 
problem  has  been  that  of  reducing  to  the  same  base  the  taxes  paid 
by  other  classes  of  corporations. 

At  the  outset  it  is  necessary  clearly  to  define  the  term  ^^net 
income,"  and  to  indicate  certain  divergent  uses  of  the  term.  !Net 
income,  as  defined  in  Article  9-a  of  the  Xew  York  State  tax 
law,  dealing  with  the  taxation  of  business  corporations.  "  means 
the  total  net  income  (as  reported  to  the  Commissioner  of  Internal 
Revenue  of  the  United  States)  before  any  deductions  have  been 
made  for  taxes  paid  or  to  be  paid  to  the  government  of  the  United 
States  on  either  profits  or  net  income  or  for  any  losses  sustained  by 
the  corporation  in  other  fiscal  or  calendar  years,  whether  deducted 
by  the  government  of  the  United  States  or  not ''  (Art.  9-a,  §  208. 


*  Supra,  p.  9  et  seq. 

t  Cf.  The  discussion  of  the  relation  between  taxes,  net  income  and  gross  income. 
Infra,  pp.  95-97. 

fill 


12 

Tax  Law).  The  basis  for  the  determination  of  net  income  for 
state  purposes  is  thus,  fundamentally,  net  income  as  defined  in 
the  federal  revenue  act.  Certain  items  exempt  from  taxation 
under  the  federal  law  are  taxable  under  the  JSTew  York  law. 
These  are : 

(1)  Dividends  from  other  corporations  subject  to  the  federal 
income  tax  and 

(2)  ^N'on-taxable  interest  on  federal  bonds. 

With  the  exception  of  the  net  loss  provision  noted  above  and 
the  inclusion  of  these  two  items,  taxable  net  income  in  Kew  York 
State  corresponds  almost  exactly  to  income  taxable  under  the 
federal  law.* 

This  definition  of  net  income  has  been  adopted  in  the  tablea 
relating  to  financial  institutions.  All  the  financial  institutions 
in  the  state  (excluding  insurance  corporations)  were  requested 
to  furnish  the  Committee  with  information  as  to  the  amount  re^ 
turned  as  net  income  to  the  Commissioner  of  Internal  Revenue, 
the  amount  received  as  dividends  from  other  corporations  subject 
to  the  federal  income  tax,  the  amount  received  in  non-taxable  in- 
terest on  federal  bonds,  and  the  amount  deducted  for  losses  sus- 
tained in  other  years. 

By  adding  these  four  items  a  figure  almost  exactly  equivalent 
to  the  net  income  on  which  business  corporations  are  taxed  in 
iNew  York  State  could  be  obtained.  The  returns  received  from 
the  financial  institutions  were  satisfactory  except  in  regard  to 
the  last  item  —  deductions  for  losses  sustained  in  other  years.  As 
some  institutions  returned  answers  to  this  question  which  were 
obviously  incorrect,  none  of  these  returns  was  used.  Fortunately 
this  item  was  so  small  a^  to  be  negligible  in  the  case  of  financial 
institutions.  The  results,  therefore,  are  not  sensibly  affected 
by  the  failure  to  take  account  of  it. 

A  direct  and  accurate  comparison  of  the  tax  burden  upon  the 
financial  institutions  and  business  corporations  is  thus  possible. 


13 


The  difficulties  are  greater  with  regard  to  public  utilities.  In 
determining  the  burden  of  taxes  upon  this  class  it  was  essential 
to  secure  a  base  period  covering  eight  or  ten  years  in  time,  since  the 
condition  of  the  public  service  corporations  during  the  last  several 
years  has  been  somewhat  abnormal.  The  reports  submitted  an- 
nually to  the  Public  Service  Commission  of  the  State  of  New 
York  have  provided  excellent  material  for  a  study  of  the  relation 
of  taxes  to  income.  The  sole  difficulty  has  arisen  from  the  fact 
that  net  income,  as  defined  in  the  regulations  of  the  Public  Service 
Commission,  does  not  correspond  to  net  income  as  reported  to 
the  tax  authorities. 

A  full  discussion  of  the  detailed  differences  is  impossible  in  the 
present  report.  In  brief,  net  corporate  income,  as  given  in  the 
reports  of  the  Public  Service  Commission,  is  equal  to  total 
revenues,  operating  and  non-operating,  less  expenses,  taxes,  uncol- 
lectible bills,  sinking  fund  accruals  and  certain  other  contractual 
deductions,  such  as  rent  and  interest.*  While  net  income  as 
here  defined  does  not  depart  widely  from  the  federal  definition, 
there  does  not  seem  to  be  a  direct  and  consistent  relationship 
between  the  two  items.  The  cause,  no  doubt,  lies  in  the  lack  of 
thoroughly  standardized  accounting  practices. 

One  change  is  made  in  this  item  in  using  it  in  the  present 
report.  In  working  out  the  tax  ratios  for  public  utilities,  the 
total  sum  paid  in  taxes  has  been  added  to  net  income  to  correct 
for  the  previous  deduction  of  this  item.  Thus  the  basis  of  all 
the  public  utility  tax  ratios  is  net  income  before  taxes  have  been 
deducted. 

In  comparing  these  ratios  with  the  ratios  for  business  corpcra- 
tions  and  financial  institutions,  this  difference  in  the  meaning  of 
net  income  must  be  borne  in  mind.  While  general  comparisons 
are  not  invalidated  by  this  difference,  attempts  to  make  refined 
comparisons  would  be  out  of  order.  As  between  public  utilities, 
of  course,  this  objection  does  not  hold,  for  the  base  is  the  same 
for  all  classes  of  public  utilities. 

Certain  other  terms  used  in  the  ratios  for  public  utilities  should 
be  explained.     'Net  worth  as  here  used  is  the  sum  of  the  follow- 


•  For  a  more  complete  deflnition,  see  Uniform  System  of  Accounts  for  Electrical 
Corporations,  New  York  State  Public  Service  Commission,  1908,  p.  31,  sec.  10. 


14 

ing  items:  "capital  stock''  and  "surplus"  (or  "deficit")-  ^'re- 
serves" and  "undivided  profits."  This  is,  of  course,  merely 
a  bookkeeping  figure  for  net  worth,  and  in  some  cases  includes 
Items  which  could  be  questioned  as  representing  elements  of 
present  value.  The  item  "gross  earnings,"  as  given  in  this  re- 
port, IS  the  sum  of  operating  revenue  and  non-operating  revenue 
as  reported  to  the  State  Public  Service  Commission.  ' 

The  Burden  of  Taxes  on  Business  Corporations 

Inasmuch  as  the  tax  on  business  corporations  is  now  on  an 
income  basis,  this  class  has  been  used  as  the  standard  to  which  the 
other  groups  have  been  compared.      The  exact  status  of  the  cor- 
porations falling  within  this  class  should  be  made  clear,  however, 
before  the  taxes  paid  by  other  corporations  are  discussed.     The 
basic  tax  now  paid  by  business  corporations  '-  is  a  41/^  per  cent  tax 
on  net  income  as  defined  above.     This  is  in  lieu  of  aU  other  fran- 
chise and  personal  property  taxes.     These  corporations  are  ta^ed 
in  addition,  of  course,  upon  all  real  property  held,  certain  forms 

of   fixed    equipment    being   included    in    the    definition    of    real 
property. 

The  amounts  paid  by  corporations  taxed  under  Article  9-a  of 
the  tax  law  are  shown  below  for  the  last  four  vears  (fiscal  years 
ending  June  30th).  The  figures  for  1918  and  1919,  it  should 
be  noted,  represent  taxes  collected  when  the  franchise  tax  was 
3  per  cent  of  net  earnings,  while  the  1920  and  1921  figures  rep- 
resent 41/^  per  cent  of  net  earnings. 


TABLE  1 
Receipts   From   Tax    ox    Business    Corporatioxs 

Receipts  f 

^^^^    $13,676,676 

^^^^    19,785,618 

^^^^    29,789,350 

^^^^    42,389,822 

In  addition  to  the  basic  tax  of  41/2  per  cent  on  net  income, 
business  corporations   are  subject   to   taxes   on  real  property   as 

coio^ad^f  SxTaw«"^^/.  TprTv-  9  ""'^  ^'^"  "'"^^  ^°  *^^  «""^"^---  ^^  --«°« 
t  The  1919  figures  include  some  taxes  levied  in  1918,  but  not  collected  till  1919. 


15 


noted  above.  For  reasons  which  are  discussed  in  more  detail 
below,*  these  property  taxes  are  not,  in  general,  as  burdensome 
as  are  other  direct  taxes.  The  amount  of  such  taxes  paid  by 
business  corporations  may  be  noted  in  passing,  however.  While 
specific  figures  are  not  obtainable,  this  amount  may  be  approxi- 
mated by  multiplying  the  total  assessed  values  of  property  held 
by  business  corporations  by  the  average  tax  rate.  In  1920  the 
amount  paid  in  property  taxes  by  mercantile  and  manufacturing 
corporations  was  approximately  30  millions  of  dollars  or  4^/^  per 
cent  of  their  total  net  income.  Thus  total  taxes  paid  in  New 
York  State  by  business  corporations  under  existing  laws  would 
be  about  9  per  cent  of  their  net  income.  This  percentage  would 
be  slightly  lower  (about  8.65)  if  the  base  taken  were  net  income 
before  any  taxes  were  deducted. f  Later  reference  will  be  made 
to  these  figures  in  comparing  the  burden  upon  these  companies 
with  the  burden  of  taxes  on  other  corporate  groups,  t 

The  Burden  of  Taxes  on  Financial  Institutions 

The  classes  of  financial  institutions  studied  in  the  present  sec- 
tion are  national  and  state  banks,  trust  companies,  investment 
companies  and  savings  banks.  The  taxes  paid  by  these  institu- 
tions have  been  summarized  aJbove.§ 

In  brief,  national  and  state  banks  pay  annually,  on  behalf  of 
their  stockholders,  a  tax  of  one  per  cent  on  the  value  of  their 
shares  of  stock.  As  the  value  of  the  shares  is  based  upon  the 
capital,  surplus,  and  undivided  profits  of  the  individual  banks, 
the  tax  amounts  to  one  per  cent  of  capital,  surplus,  and  undivided 
profits.  Trust  companies  pay  a  franchise  tax  of  exactly 
the  same  percentage  of  their  capital,  surplus,  and  undivided 
profits.  Investment  companies  pay  a  franchise  tax  calculated  upon 
a  double  basis ;  it  is  equal  to  one  per  cent  of  surplus  and  undivided 
profits,  plus  one  and  one-half  mills  on  each  dollar  of  capital  stock. 
Savings  banks  pay  a  franchise  tax  equal  to  one  per  cent  of  the 
par  value  of  surplus  and  undivided  earnings.  In  addition,  all 
these  institutions  are  subject  to  a  tax  on  their  real  property. 

*  Gf.  infra,  pp.  25,  26.  ,     ,     . 

t  Attention  should  be  called  to  the  fact  that  the  base  used  in  these  calculations 
Is  that  part  of  the  total  net  income  of  business  corporations  which  has  been 
allocated  to  New  York. 

t  Infra,  pp.  28,  90-93. 

§  Supra,  p.  9. 


-/ 


16 

of  L':k~irS- /;r  '"^^^^^ '''''''''-'  ^^  ^^^  ^- 

t^^^jv  ui  irancnise  taxes  are  e-iven  in  i^h^  ^^n      •       ,  1 1 
coveimg  the  period  1917-1990       t^^  ^  /.  *=  taoie, 

state  banks  have  been  es'ti  b^Ldirt  r^^;"^^^  -"^^ 
from  the  bank-stock  tax  between  the^  JoZstthefjT^ 
the  aggregate  capital,  surplus,  and  undivided  nrnfi^      Tl     ^^^ 
groups.     The  fact  ha.  been  ^oted  elthere  ^C  Is    T  *"° 
which  are  actual  reeeinfQ  h^  fio    i  ,  ^^^^^  figures, 

a  lag  of  one  ,ea    ZZolZjZl  "^'"^  '""^  ''*^'  ^''- 
banks,  which  have  been  ns^^  ,        "l''""*  '"*"™  ^^<'™  ^^^^ 

section.  "^  '°  compxhng  the  other  tables  in  this 


Recei 


PTS 


TABLE  2 
From    Bank     Stootc     m>     t?^. 

^       OIUCK       OR       -bRANCHlSE 

-b  iNANciAL  Institutions* 


Taxes 


on 


CLASS  OF  CORPOKATION  l^^  ^"-^  '^  ''-^  «™-  <>«  Fk..ch„.  T«,, 


1917 


1918 


National  banks. 
State  banks.  .  .  . 
Trust  companies 
Savings  banks 


«4, 390, 105 

932.032 

2,536,718 

1.394.647 


1919 


$4,602,252 
981,762 
2,778.674 
1,455.434 


15,010,510 
1.068,152 
2,911.474 
1.337,961 


1920 


$5,792,208 
1.239,268 
3,196,586 
1,439,896 


1921 


S3, 377, 292 
881,950 


What  do  these  taxes  amount  to  in  terms  of  net  income?    TV 
question  must  be  answered    fir,t    fn,.  ,1.     7-J^     mcome?    This 

falling  within  a  given  clat, t^^L  ^IH  'T'^''^''' 
whole    in  nrHp^  +v,o+  •  s^conaiy,  ±or  the  class  as  a 

be  made  ""^"""'^  "^^'^  ^-'--  corporations  may 

The  first  question  relating  to  the  Kiir,l»r,  ^f  . 
members  of  a  given  class  i.  L        I        1  *^''^  "P<»^  ^^"^ 

immediatelv  fdW  ^g'   Tab le Tsh'""'!'^'^  '"^  *^  ^^  *«"- 
income  paid  in  the  ba^k  l\^l      u        '  '^'  Percentage  of  net 

York  sLe,  clal:rfiracrL:^o'c  tr  '^"^  ^"  f- 

"sed,  has  been  defined  above      Botl,  T  ■  ''"''*°'''  "'  ^"^ 

are  averages  for  the  three  ^ar!  0  8  Zr  'f.T  '^^^^ 
remaining  tables  present  similar  fi^S  fir  tl'^tt  f  "^'^ 
financial  institutions.  ^^^^'^  '''^^^^  ^^ 

thrs'e-iliraTe-L't-r-.'-  "-^  "»'  »-'  '-.uded  in  thi.  table.     The  receipts  fron. 


17 


TABLE  3 

Percentage  op  Net  Income  Paid  in  Bank  Stock  Tax  by 
National  Banks  in  New  York  State 

Frequency  Table  Showing   the  Relative  Burden  of   the  Bank  Stock   Tax  on 

National  Banks,  by  Classes 

(Based  upon  the  average  tax  and  the  average  State  net  taxable  income  for 

the  "three  years  1918,  1919  and  1920) 


Number  Patinq 

Num- 

ber 

in 

each 

CLASS* 

0 

2% 

4% 

6% 

1 
8%  10% 

12%  [14% 

16% 

18% 

20% 

22% 

1 
24%;26% 

30%   ^ 

to !  jr_ 

class 

to 

to 

to 

to 

to     to 

to  1  to 

to 

to 

to 

to 

to 

to 

1.9% 

3.9 

5.9 

7.9 

9.9  11.9 

13.9 

15.9 

17.9 

19.9 

21.9 

23.9 

25.9 

27.9 

31.9 

per 

cent 

A 

11 

28 



1 
2 

3 

5 
8 

1 

7 

4 

1 

4 

i 

i 

i 

B 

c 

204 
155 

1 

2 
1 

6 

8 
20 

31 

33 
37 

83 

35 
33 

45 
26 

31 
11 

47 

20 
11 

32 

7 
6 

13 

3 
3 

6 

5 

2 

8 

3 
1 

4 

3 
4 

3 
2 

5 

2 

5 

D 

Total 

398 

1 

76  j  75 

2 

5 

*  Class  A  is  composed  of  companies  with  capital,  surplus,  and  undivided  profits 
of  .$10,000,000  and  over;  Class  B.  of  $1,000,000  to  $10,000,000;  Class  C,  $100,000  to 
$1,000,000  ;  and  Class  D,  less  than  $100,000. 

(Three  national  banks  reported  an  average  deficit  for  this  period) 


TABLE  4 

Percentage  of  I^et   Income   Paid  in   Bank   Stock  Tax  by 

State  Banks  in  New  York  State 

Frequency  Table  Showing   the  Relative  Burden  of  the  Bank  Stock   Tax  on 

State   Banks,   hy   Classes 

(Based  upon  the  average  tax  and  the  average  State  net  taxable  income  for 

the  three  years   1918,   1919  and   1920) 


Num- 
ber 
in 
each 
class 

Number  Fating 

CLASS  * 

0 

to 

1.9% 

2% 

to 

3.9 

4% 

to 

5.9 

6% 

to 

7.9 

8% 

to 

9.9 

3 

17 
16 

36 

10% 

to 

11.9 

3 

7 
8 

18 

12% 

to 
13.9 

2 
9 
4 

15 

14% 

to 
15.9 

i 

8 
3 

18% 

to 
19.9 

i 

1 

20%  22% 

to      to 

21.9  23.9 

2  i 
1 

3  1 

34% 

to 
35.9 

i 

•■ 
1 

Over 
40 
per 

cent 

A 

1 
21 
77 
57 

"2 

i 

1 
2 

3 

14 

6 

1 

9 

13 

17 

B 

C 

1 

D 

Total 

156 

2 

23  1  40 

12 

2 

1 

*  Class  A  is  composed  of  companies  with  capital,  surplus,  and  undivided  profits  of  $10,000,000 
and  over;  Class  B,  of  $1,000,000  to  $10,000,000;  Class  C,  $100,000  to  $1,000,000;  and  Class  D, 
less  than  $100,000. 

(Two  State  banks  reported  an  average  deficit  for  this  period) 


18 


TABLE  5 

Percentage    of   Net    Income    Paid    in    Franchise    Tax    by 
Trust  Companies  in  New  York  State 

Frequency    Talle   Showing    the   Relative    Burden   of   the   Franchise    Tax   on 

Trust   Companies,   by  Classes 

(Based  upon  the  average  tax  and  the  average  State  net  taxable  income  for 

the  three  years   1918,   1919  and   1920) 


CLASS* 

Num- 
ber 
in 
each 
class 

Number  Patino 

0 

to 

1.9% 

2% 

to 

3.9 

1 

1 
3 

4% 
to 
5.9 

i 

6 

6% 
to 
7.9 

4 

4 

10 

18 

8  /O 

to 
9.9 

2 
4 
5 

11 

10% 

to 

11.9 

1 
8 
7 

16 

12% 

to 

13.9 

3 
5 

8 

1AC/ 

•l*/0 

to 
15.9 

2 

16% 

to 

17.9 

i 

1 

18% 

to 

19.9 

3 

20% 

to 

21.9 

2 
2 

26% 

to 

27.9 

i 
1 

30% 

to 

31.9 

1 

1 

36% 

to 

37.9 

i 

1 

Over 
40 

per 
cent 

8 

25 
48 

"2 

1 

A. 

B 

C 

i 

Total 

81 

3 

5  1     '  1 

1 

2 

2 

3 

1 

of*«lft*nnnnnA*^°™S®^^^   ^*  companies  with   capital,   surplus  and   undivided  profits 
$ioo^o2b'?oT,Oo'o%o""''''     ""'^'^    ^'     ''    $1,000,000    to    $10,000,000;     Cla^  C. 

(One   trust   company  reported   an   average   deficit  for   this  period) 


TABLE  6 

Percentage   of   Net   Income   Paid   in    Franchise    Tax   by 
Investment  Companies  in  New  York  State 

Frequency    Table   Showing    the   Relative    Burden    of    the   Franchise    Tax   on 

Investment  Companies,  by  Classes 

(Based  upon  the  average  tax  and  the  average  State  net  taxable  income  for 

the  three  years   1918,   1919  and   1920) 


CLASS  * 

Number 
class 

Number  Paying 

0 

to 

1.9% 

2% 

to 

3.9 

4% 

to 

5.9 

6% 

to 

7.9 

8% 

to 

9.9 

B 

3 
12 

1 
1 

1 
7 

1 
2 

i 

c 

Total.. 

i 

15 

2 

1 

8 

3 

1 

1 

of  7i!S^.oV\olWiA  TSt  »Ioo.oS.n'o'"*i»!o"ob.''°''  •'■'*'^""'''  "^''^ 


F-W 


I 


19 


TABLE  7 

Percentage  of  Net   Earnings   Paid  in   Franchise   Tax   by 
Savings  Banks  in  New  York  State 

Frequency    Table   Showing    the   Relative    Burden    of   the   Franchise    Tax   on 

Savings  Banks,  by  Classes 

(Based  upon  the  average  tax  and  the   average  net  earnings  over   expenses 
and   dividends   for   the   three   years    1918,    1919   and    1920) 


CLASS* 

.Vumbrr 

in 

class 

Number  Paying 

0 

to 

1.9% 

2%    4% 

to      to 

3.9    5.9 

i 

6% 

to 

7.9 

8% 

to 

9.9 

6 

10 

3 

10% 

to 

11.9 

12% 

to 
13.9 

14% 

to 
15.9 

18% 

to 

19.9 

20% 

to 
21.9 

26% 

to 
27.9 

B 

30 
73 
32 

1 
3 
3 

1    s 

6  i  21 

7  !   10 

8 

21 

7 

3 
5 
2 

1 
5 

1 

1 

i 

1 

C 

D 

Totel  * 

135 

7 

14  1  39 

36 

19 

10 

6 

1 

1 

1 

1 

*  Class  B  is  composed  of  companies  with  surplus  and  undivided  profits  of 
$1,000,000  to  $10,000,000;  Class  C,  $100,000  to  $1,000,000;  and  Class  D,  less 
than  $100,000. 

The  outstanding  fact  is  that  the  tax,  as  at  present  levied,  falls 
ui)on  members  of  the  same  group  with  very  unequal  weight, 
when  expressed  in  terms  of  tax-pajing  ability,  as  represented  by 
net  income.  In  the  national  bank  group  one  institution  paid 
less  than  two  per  cent  of  its  income  in  the  bank  stock  tax,  while 
five  paid  over  forty  per  cent.  Between  these  two  limits  there  is 
a  wide  dispersion.  Twenty-eight  banks  pay  more  than  twenty  per 
cent  of  their  net  income  in  meeting  this  tax.  Two  hundred  and 
one  of  the  total  of  398  banks  pay  ten  per  cent  or  more. 

The  extent  to  which  this  inequality  is  connected  with  inequali- 
ties of  size  is  also  indicated  by  the  table.  There  is  no  uniformity 
of  burden,  even  within  a  given  class,  but  in  general  the  large 
banks  pay  a  smaller  percentage  of  their  net  income  in  taxes  than 
do  the  banks  of  medium  or  small  size.  Thus  ten  of  the  eleven 
banks  in  Class  A  (having  capital,  surplus,  and  undivided  profits 
of  $10,000,000  or  over)  pay  less  than  ten  per  cent  of  their  net 
income  in  meeting  the  bank  stock  tax.  Of  the  204  banks  in 
Class  C  (having  capital,  surplus,  and  undivided  profits  of 
$100,000  to  $1,000,000)  only  79  pay  less  than  ten  per  cent. 

The  average  burden  in  each  class  is  indicated  in  the  following 
table,  a  summarv  of  the  five  detailed  tables: 


20 


TABLE  8 

AvEKAOE  Ratio  of  Baxk-Stock  Tax  or  Frain^chise  Tax  to 
Xet  Ixcome,  Financial  Institutions  in  New  York 
State  by  Classes. 

f  JP'  average  employed   in  each  case  is  the  median ;  thus  one-half  of  the 
total  number  of  corporations  included  in  each  of  the  gven  Iroups  Paid  more 

htlf%'i^d?rsy'"'"'^-"^  ^'  *'^^^  "^^  '^^^"^  -  --'-^  theTa'x!  whHeTn" 

Average  ratio  of 
bank  stock  or 
Class  of  Corpohation  *  Number  franchise  tax 

u«AiioN  reporting  to  net  income 

National  Banks  —  {median) 

Class  A   (Over    $10,000,000)     ...  „  «  ^^ 

B  ($1,000,000  to  $10,000,000):::::*         28         q?2 

C    ($100,000    to    $1,000,000)..    204  u^ 

D    (Less    than    $100,000)..: f^  "  ;J| 

Total —  ~: 

State  Banks-       ^^^  ^^•<« 

Class  A     

B :: 1         7 

C  21  7.67 

D  :: II         »oo 

57  8.56 

Total ~ 

Trust  Companies—              ^'^^ 

Class  A     

B              S  7.5 

C    25  10.12 

48  9.6 

Total  .  .  r ^ 

Investment  Companies  —  ^ "  ^^ 

Cla^s  B     

C  3  3 

12  3.43 

Total 71 

Savings  Banks—                        ^'^'^ 

Class  B     

C                 30                     7.25 

D    73                     6.62 

32                     5.20 

Total — 

135  6.42 

The  average  given  above  as  most  representative  of  the  typical 
condition  m  each  class  is  the  median,  the  value  of  the  middle 
Item  m  an  array.  Thus  for  national  banks  in  Class  A  the  median 
IS  6.6  per  cent.  That  is,  the  number  of  banks  paying  more  than 
^•^  P^^  ""^^  ^^  ^^^'^  ^^^  income  in  meeting  the  bank  stock  tax 

(in  ?hroaVorS??n|?  SLTJ^'wifh^Trn^^l'^  capital    surplus,  and  undivided  profits 
and  over:  Class  B    of  floOO  000  to  $10  000  on?»"^^^^^  P/.^At^)    ^^  $10,000,000 

and  Class  D,  less  than  IIOO.OOO.      ^^^'^^^'^^  5  Class  C,  of  $100,000  to  $1,000,000; 


21 


is  exactly  equal  to  the  number  paying  less  than  that  amount.  In 
Class  B  the  median  is  9.14  per  cent,  while  in  Class  C  it  is  11.02 
per  cent.  Thus  of  the  204  national  banks  in  Class  C,  102  pay 
more  than  11.02  per  cent  of  their  net  income  in  meeting  this  tax, 
while  102  pay  less  than  that  amount.  The  difference  between  the 
situation  in  this  class  and  that  in  Class  A  is  obvious.  The  median 
value  in  Class  D  is  9.18  per  cent,  a  smaller  value  than  that  in 
Class  C.  The  median  of  the  entire  group  of  national  banks, 
398  in  all,  is  10.03  per  cent.  One  hundred  and  ninety-nine  banks 
pay  less  than  this  amount,  and  199  banks  pay  more. 

This  inequality  as  between  corporations  in  a  given  class  is 
found  in  the  case  of  each  of  the  other  types  of  financial  institu- 
tions. State  banks  show  a  distribution  much  the  same  as  that 
found  for  national  banks,  though  the  difference  between  classes 
is  not  so  pronounced.  The  same  is  true  of  trust  companies.  In 
the  case  of  investment  companies,  a  group  in  which  the  general 
tax  burden  is  less  than  it  is  for  other  financial  institutions,  the 
inequalities  within  the  group  are  less  pronounced.  Of  the  fifteen 
institutions  for  which  complete  records  were  obtained,  none  paid 
more  than  10  per  cent  of  their  net  income  in  meeting  these 
franchise  taxes.  The  median  for  the  group  as  a  whole  was  3.37 
per  cent. 

In  studying  the  burden  of  taxes  on  savings  banks,  the  basis  has 
been  net  earnings  over  expenses  and  dividends.  This  figure 
corresponds  to  net  income  as  used  by  other  financial  institutions. 
That  the  franchise  tax  on  savings  banks,  when  expressed  as  a 
percentage  of  net  earnings,  falls  with  unequal  weight  upon  these 
institutions,  as  in  the  cases  of  other  classes  of  institutions,  is 
demonstrated  by  the  table  and  graph  covering  this  group.* 

These  wide  discrepancies  in  tax  burden  which  occur  among 
corporations  of  the  same  class  are  due  to  the  fact  that  there  is  no 
consistent  relationship  between  capital  and  surplus  on  the  one 
hand  and  earning  power  on  the  other.     In  general,  of  course,  an 

♦  When  account  is  taken  of  three  national  banks,  two  State  banks  and  one  trust 
company  which  reported  deficits  for  the  period  covered,  and  two  savings  banks 
paying  no  tax  because  of  credit  granted  for  bonds  held,  the  medians  become : 

Per  cent 

National  banks 10 .  11 

State  banks 8.67 

Trust  companies   9.45 

Investment  companies    3 .  37 

Savings  banks    6 .  36 


22 

increase  in  capital  and  surplus  means  increased  earnings,  but 
that  the  relationship  is  not  direct  is  demonstrated  by  the  fic^ires 
presented  above.    A  tax  which  must  be  paid  out  of  net  ear^™ 

ecur"^  tZT  T'T  '"^'  "^^'  ^'^  '''''''  ^^^^  -^^  --tion"^ 
occur  m  the  burden  of  taxes,  expressed  in  terms  of  net  income. 

One  other  aspect  of  the  present  system  is  worthy  of  note      As 

nto   tt;    !1       '"^'"^  "P  ^  ^"^'P^-  ^^^'  I-^^-^  --ings  back 
mto   the    enterprise,    the    present    method    of   le^Ting    taxes    on 

financial  institutions  places  the  heaviest  burden  iLn  thelatter 
n  a  sense,  thus,  these  taxes  are  taxes  which  discriLna^  agal" 
^e  consen^ative  concern  which  builds  up  a  surplus.     Thev  can 
be  partly  evaded  by  distributing  dividends  closely  ' 

tionsTxf ""   °'  ^"^"^^^^   institutions   and   business   corpora- 

ne;ms  o7net'^  ""  '"  '^^'"'^  ''''''^''^^  ^^^  -P^--^ 

tL  on  the  ""'"'  T^'"^  ^''^  '^'  '"^^'-^  ^y^  P-  -nt 

tax  on  the  net  income  of  business  corporations?     It  has  been 

ttrTher'  ^'"  '''-'  r^^"^^^^  -  ^--^  financial  ItS: 

t  on  of  2  ""T  '."  ^'  ^'"^""^  ^^^  ^"^*^-  -  *-  the  rela- 
tion  of  the  average  burden  on  financial  institutions  to  the  average 
burden  on  business  corporations.  ^ 

witht  T7  "  .T^^-^^^^  ^y  t^e  -^e  variation  in  burden 
withm  the  financial  groups.  In  classes  characterized  by  such 
ex  reme  variation,  what  figure  is  to  be  t.ken  as  representative  of 
the  average  burden  of  present  taxes  ?  One  average,  the  median, 
has  b  en  used  above,  and  the  comparison  on  this  basis  may  bJ 
extended   for  the  present   purpose.     Another   average,   however 

should  be  used  to  supplement  the  median.     The  latter  gives  the 
sa^e  weight  to  both  large  and  small  banks,  but  in  computing  tt 

ome  w  ;^"-^r  '"  '""'"'  ^'  '"^"^^-^  -^^*  ^-  -  -t  in- 
come would  yield  as  much  as  the  present  bank  stock  and  franchise 
taxes,  a  ratio  giving  this  information  is  required 

h/V^l\rT""  '^"  P-^^-tage  of  net  income  paid  in  taxes 
by  each  of  the  classes  of  financial  institutions  has  been  determined 
by  computing  the  ratio  of  total  taxes  paid  over  a  given  period  to 


23 

the  total  net  income  of  all  the  corporations  In  each  class  for  the 
same  period.  Thus,  in  the  case  of  national  banks  in  IN^ew  York 
State,  the  total  amount  paid  in  bank-stock  taxes  by  397  banks, 
during  the  years  1918,  1919  and  1920,  and  the  total  net  income 
of  these  banks  during  this  period  have  been  determined.  The 
ratio  of  the  former  figure  to  the  latter  is  .068.  The  amount  paid 
in  taxes  is  thus  6.8  per  cent  of  net  income  during  this  period. 
The  percentages  as  determined  for  the  different  classes  of  financial 
institutions  are  shown  in  the  following  table.  The  comparison 
made,  it  'should  be  understood,  does  not  include  real  or  personal 
property  taxes  paid  by  any  of  the  groups  involved. 


TABLE  9 

Percentage    of    Net    Income    Paid    in    Bank    Stock    or 
Franchise  Tax  by  Financial  Institutions 

(Ratios  based   on   aggregates   of  three-year   figures,    1918-1920) 

Ratio  of  bank-stock  tax 

(or  franchise  tax)  to  net 

income  after  property 

taxes  deducted 

Percentage 

National  banks 6 .  80 

State  banks 6.58 

Trust  companies 7.33 

Investment  companies 3.13 

Savings  banks 5 .  80 

It  is  evident  that  with  one  exception  financial  institutions  pay 
a  somewhat  larger  percentage  of  their  net  income  in  meeting  their 
bank  stock  or  franchise  taxes  than  do  business  corporations  in 
paying  the  tax  on  net  earnings.  In  comparison  with  the  4^/2  per 
cent  paid  by  business  corporations  the  three-year  average  for 
national  banks  shows  that  6.8  per  cent  of  their  net  income  has 
been  paid  in  taxes,  as  has  been  stated  above.  The  corresponding 
figure  for  state  banks  is  6.58  per  cent,  for  trust  companies  7.33 
per  cent,  and  for  savings  banks  5.8  per  cent.*  Investment  com- 
panies constitute  the  one  class  paying  less  than-  business  corpora- 

*  These  ratios  for  trust  companies  and  savings  banks  are  based  upon  taxes  actuaUy 
paid,  not  including  the  amount  of  the  levy  for  which  credit  was  granted  for  State 
bonds  held.  If  the  tax  levied  be  used.  Instead  of  the  tax  paid,  the  ratios  become 
7.5  per  cent  for  trust  companies  and  6.74  per  cent  for  savings  banks. 


24 

tions,  on  the  average.     The  fifteen  companies  included  showed 
an  average  of  3.13  per  cent  of  net  income  paid  in  taxes.* 

A  comparison  may  dso  be  made  of  the  number  of  corporations 
of  each  type  pajmg  a  percentage  of  net  income  in  taxes  equal  to 

IS  given  in  the  following  siimmarj: 

» 

T:ABLE  10 
Financial  iT^sTiTUTio^s,  by  Classes,  Paying  41/2  Per  Cent 
o^^^ET  Income  on  Less  in  Bank-Stock  Tax  on  Fbanchise 


CLASS 


National  banks 

State  banks 

Trust  companies . . 

Investment  companies 
Savings  banks... 


Total 

number 

reporting 


Number  paying 

i^  per  cent 

or  less  in 

bank-stock  tax 

or  franchise  tax 


398 

156 

81 

15 

135 


17 
7 
11 
11 
30 


mve  tment  companies  group  pay  more  than  4%  per  cent  of  their 
net  income  m  meeting  the  taxes  named.  These  figures  sub- 
s.n  late  the  evidence  of  the  other  tables  and  throw  some  addi- 

In  studying  the  percentage  of  net  income  paid  in  taxes  it  i. 
of  some  interest  to  determine  the  year-to-year  changes.  The  fo" 
owing  table  shows,  for  all  the  classes  here  considered,  the  ratio  of 
taxes  to  net  income  for  the  years  1918,  1919  and  1920  The 
perceiuages  given  were  calculated  on  the  basis  of  yearly 'a^^n-e- 
gates,  the  general  method  being  that  indicated  above.  "^  ^et^nco^e 
means  m  each  case  net  income  before  bank  stock  or  franchise 
taxes  have  been  deducted.  -Liducnise 

of  *t?e'YaftV;^bilnT  n^^fiS.'"  ""  ""'^^  ^-"^^^  ^-  Stat,  bonds  held,  the  amount 


25 


TABLE  11 


Percentage  of  Net  Income  Paid  in  Bank-Stock  Tax  or 
Franchise  Tax  by  Financial  Institutions  in  New  York 
State,  Classified,  by  Years,  1918-1919 


CLASS  OF  INSTITUTION 


National  banks 

State  banks 

Trust  companies 

Investment  companies 
Savings  banks 


Percentage  of  Net  Income  Paid  in 
Bank-Stock  Tax  or  Franchise  Tax 


1918 


7.0 
8.2 
8.4 
5.0 
8.1 


1919 


6.3 
5.9 
7.6 
3.0 
7.0 


1920 


6.7 
6.2 
6.5 
2.7 
3.3 


It  is  apparent  that  a  tax  on  capital  and  surplus  means  a 
tax  which  varies  from  year  to  year,  when  expressed  in  terms  of 
net  income.  When  income  is  increasing  faster  than  the  surplus 
is  being  built  up,  this  means  a  decreasing  annual  tax.  This  con- 
dition prevailed  during  the  three  years  here  considered. 

This  is  particularly  true  in  the  case  of  savings  banks  and 
investment  companies.  The  tax  on  the  former,  which  amounted 
to  8.1  per  cent  of  net  earnings  in  1918,  fell  to  3.3  per  cent  of 
net  earnings  in  1920.  The  fact  that  the  present  tax  is  based  upon 
a  variable  surplus,  having  no  immediate  relation  to  earnings,  is 
clear  in  this  case.  For  the  savings  banks  here  included  (135 
in  number)  surplus  and  undivided  profits  decreased  from 
$144,780,305  in  1918  to  $98,080,640  in  1920,  while  net  earn- 
ings increased  from  $14,274,279  in  1918  to  $23,275,379  in 
1920.* 

In  the  above  treatment  the  comparison  of  tax  burden,  as 
between  financial  institutions  and  business  corporations,  has  been 
confined  to  the  discussion  of  taxes  other  than  property  taxes.  This 
has  been  done  on  the  assumption  that  the  burden  of  non-property 
taxes  is  much  more  direct  and  immediate  than  that  of  taxes  on 
real  property.  A  long-standing  tax  on  real  property  has  in  gen- 
eral been  capitalized  in  determining  the  value  of  the  property, 
so  that  the  present  payer  does  not  feel  the  burden  directly.     It  is 

•  These  figures  are  for  net  earnings  after  taxes  had  been  deducted.     The  ratios 
are  based  upon  net  earnings  before  taxes  were  deducted. 


29 

considered,  therefore,  that  a  comparison  of  the  burden  of  non- 
property  taxes  has  more  significance  for  our  present  purposes 
than  a  comparison  of  the  burden  of  all  taxes. 

Having  stressed  the  main  relations  involved  in  the  first  com- 
parison, however,  it  is  of  some  interest  to  compare  the  burden 
ot  property  taxes,  as  borne  by  the  different  corporate  groups     In 
■computing  the  ratios  given  in  the  table  following,  the  returns 
from  individual  financial  institutions  have  been  utilized      The 
ratios  are  based  upon  the  amount  paid  in  property  taxes  and 
the  net  income  for  the  year  1920.     The  net  income  used  as  a  base 
is  the  net  income  before  any  taxes,  franchise  or  property  have 
been  deducted.     In  determining  the  ratio  for  business  corpora- 
tions, total  net  income  has  been  calculated  by  capitalizing  the 
amount  paid  in  income  taxes.    The  amount  of  property  taxes  paid 
by  business  corporations  is  a  fairly  close  approximation  obtained 
by  multiplying  the  total  assessed  value  of  such  property  by  the 
average  tax  rate  for  the  State. 

TABLE  12 

Perce^taoe    of   Nbt   Ir^coME    PAin    IN   General    Property 
lAXES  BY  Business  and  Financial   Coeporations,   1920 

Percentage  of  net  inrome 
Class  of  corporations  P^'^  '"  general  property 

Business    Corporations    (Mercantile    and  '-<-'— .o„a., 

Manufacturing)     .    ^ 

National  Banks   .   ^ 

State  Banks «  « 

Trust  Companies ^  ^ 

Investment   Companies    q */^ 

Savings  Banks on 

o .  o 

It   is  apparent  that  there  is   a  considerable   variation   in   the 

"^T.?^!.  ""'  """'  P'^^  ^"  P^^P^^^^  '^'''  A«  compared 
with  the  41/.  per  cent  paid  by  business  corporations,  trust  com- 
panies pay  4.1  per  cent  and  State  banks  3.5  per  cent  The 
amount  paid  by  national  banks  was  only  1.5  per  cent  of  their 
net  income,  m  1920,  while  investment  companies  paid  but  seven- 
tenths  of  one  per  cent.     These  figures  are  in  all  cases  somewhat 


27 


smaller  than  the  percentage  paid  in  earlier  years,  the  decrease 
being  due  to  the  increase  in  the  incomes  of  financial  institutions 
in  1919  and  1920.  The  figures  for  the  earlier  years  are  given 
below  for  financial  institutions,  with  the  exception  of  Savings 
Banks. 

TABLE  13 

Percentage  of  IN^et  Income  Paid  in  Property  Taxes  by 
Financial  Institctions  in  ISTew  York  State^  by  Years, 
1918-1920 


class  of  corporation 


National  banks 

State  banks 

Trust  companies 

Investment  companies 
Savings  banks 


Percentage  of  Net  Income 
Paid  in  Phoperty  Taxes 


1918 


1 

7 

5 

4 

5 

0 

1 

6 

1919 


1.5 
3.6 
4.8 
1.9 


1920 


1.5 
3.5 
4.1 
.7 
3.6 


A  summary  of  the  total  amounts  paid  in  taxes  by  business 
corporations  and  financial  institutions  may  now  be  given.  Th^ 
following  table  shows  the  percentage  of  net  income  paid  in  all 
taxes  (bank-stock  (or  franchise)  and  property)  by  business  cor- 
porations and  financial  institutions.  For  financial  institutions, 
with  the  exception  of  savings  banks,  figures  for  three  years  are 
given. 

In  the  case  of  business  corjx)rations  1920  figures  alone  are 
used,  the  property  taxes  paid  in  that  year  being  added  to  4^/2 
per  cent  of  their  total  net  income  in  securing  the  total  tax  figures. 
Net  income  in  each  case  is  a  figure  from  which  no  taxes  have 
been  deducted.* 


*  There  is  thus  a  slight  difference  between  the  present  base  and  the  one  used 
for  the  earlier  ratios.  Property  taxes  had  been  deducted  as  an  element  in 
expense  in  arriving  at  net  income  as  used  in  the  earlier  tables,  but  in  the  present 
case  no  such  deduction  has  been  made. 


28 


TABLE  15 

PkhC  KyTAGES    OF    JSTet    InCOME    PaID    IN    FRANCHISE    (OR    BaNK- 

Stock)  and  PRorERTY  Taxes  by  Business  Corporation3 
AND    Financial    Institutions    in    :New    York     State 
1918-1920.  ' 


CLASS  OF  corporation 


Business  corporations 

National  banks 

State  banks 

Trust  companies 

Investment  companies 
Savings  banks 


Pekcentace  of  Nkt  Income 
Paid  in  Taxes 


1918 


1919 


8.7 
13.3 
12.9 

6.4 


7.7 

9.4 

12.0 

4.8 


1920 


8.65 
8.1 
9.6 
10.3 
3.3 
6.8 


The  table  shows  somewhat  the  same  distribution  of  burden 
as  was  found  in  the  case  of  non-property  taxes,  trust  companies 
and  investment  companies  standing  at  the  two  extremes.  The 
difference  between  the  burden  on  business  corporations  and 
financial  institutions  is  less  pronounced,  however,  the  property 
taxes  being  relatively  larger  for  the  former  class. 

The  warning  which  was  given  above  that  taxes  on  real  property, 
apart  from  improvements,  are  not  necessarily  borne  by  the 
present  tax-payer,  must  be  remembered  in  studying  these  tables. 
Real  burden  is  better  indicated  by  the  first  tables,  dealing  with 
non-property  taxes,  than  by  those  in  which  account  is  taken  of  all 
taxes  paid. 

The  detailed  figures  on  which  the  above  ratios  are  based  arc 
included  in  the  appendices. 

The  Burden  of  Taxes  on  Public  Utilities 

The  taxes  paid  by  public  service  corporations  in  Xew  York 
State  have  been  described  in  an  earlier  section  of  the  present 
report.*     The  following  is  a  brief  summary  of  that  section: 

All  public  service  corporations  are  taxed  on  their  real  and  ]yer- 
sonal  property  and  on  the  value  of  their  special  franchises.  This 
latter  tax  is  based  in  part  on  the  value  of  tangible  property  in 

•  Cf.  supra,  p.  10. 


29 


the  streets,  and  in  part  upon  the  value  of  certain  intangible  ele- 
ments. The  value  of  these  intangible  elements  is  determined  with 
reference  to  corporate  earning  power.  The  taxes  described  above 
are  paid  to  the  localities  in  the  form  of  a  general  property  tax. 
In  addition  to  these  local  charges  all  public  utilities  are  taxed  by 
the  State  on  their  gross  earnings  (or  on  gross  earnings  and  excess 
dividends),  and  certain  classes  are  taxed  on  their  capital  stock. 
The  rate  of  the  gross  earnings  tax  varies,  being  one-half  of  one 
per  cent  for  steam  railroads,  telo})hone  and  telegraph  companies, 
and  gas,  electric  and  water  companies,  and  one  per  cent  for  ele- 
vated or  surface  electric  railroads.  Underground  electric  rail- 
roads are  taxed  upon  the  same  basis  as  steam  railroads.  The 
general  franchise  tax  on  capital  stock  is  paid  by  steam  railroads, 
underground  electric  railroads  and  telephone  and  telegraph 
companies. 

The  amounts  paid  in  taxes  by  the  different  classes  of  public 
service  corporations  during  the  period  1917-1920  are  shown  in 
the  following  table.  The  totals  for  all  public  utilities  show  the 
yields  of  the  various  taxes.  In  certain  cases  the  exact  amount 
paid  by  a  given  class  of  public  service  corporation  in  meeting  a 
given  tax  could  not  be  ascertained  from  the  Tax  Commission 
records,  and  in  these  cases  the  figures  presented  are  estimates. 
These  have  been  checked  and  tested,  and  are  believed  to  approxi- 
mate closely  the  actual  tax  paid. 


30 


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33 

Method  of  Study.— The  general  method  employed  in  deter- 
liiining  the  burden  of  taxes  on  the  different  classes  of  public  serv- 
ice corporations  has  been  the  selection  of  a  sample  group  from  each 
class,  and  the  intensive  study  of  this  group  with  respect  to  earn- 
ings, expenses,  and  taxes.  It  has  been  possible  to  secure  adequate 
samples  of  telephone  and  telegraph  corporations,  street  railways, 
and  gas  and  electric  corporations.  For  these  groups  the  ratios 
and  tables  are  based  upon  an  intensive  study  of  the  individual  cor- 
porations included  in  the  samples  during  the  period  1911-1920. 
A  study  of  steam  railroads  upon  the  same  basis  has  been  impos- 
sible. Because  of  the  wartime  control  of  railroads  by  the  govern- 
ment, the  reports  for  the  years  1918,  1919  and  1920  are  not 
directly  comparable  with  those  of  earlier  years.  Secondly,  most 
steam  railroads  engaged  in  interstate  operations  make  no  segre- 
gation of  their  tax  payments  by  States,  in  reporting  to  the  Public 
Service  Commission  or  to  the  Tax  Commission  of  ^ew  York 
State.  A  detailed  study  of  representative  railroad  companies  has 
thus  been  impossible,  for  the  small  number  of  companies  for 
which  detailed  figures  were  available  was  not  considered  suffi- 
ciently representative  to  justify  the  drawing  of  conclusions. 

The  ratios  for  steam  railroads  have  therefore  been  derived  in 
another  way.  The  total  amount  paid  in  taxes  to  New  York 
State  and  localities  by  all  the  steam  railroads  operating  within 
the  State  has  been  determined  from  the  records  of  the  Tax  Com- 
mission. From  the  records  of  the  Public  Service  Commission 
have  been  secured  figures  on  gross  earnings,  operating  expenses, 
and  net  income  for  the  period  1911-1919,  inclusive,  for  all  steam 
railroads  operating  in  New  York  State.  In  using  the  records  of 
the  last  two  years  of  this  period  the  actual  net  earnings,  apart 
from  the  federal  rental,  have  been  taken.*  An  allocation  has 
been  made  in  each  case  on  the  basis  of  main  track  mileage. 

In  determining  the  ratios  of  taxes  to  earnings  and  expenses 
it  has  been  necessary  to  exclude  figures  for  the  year  1916,  as  the 
fiscal  year  of  the  State  was  changed  in  that  year,  and  the  tax 
receipt  figures  are  correspondingly  distorted. 

*  For  each  road  under  federal  control  the  sum  of  the  net  income  of  the  corpo- 
^^tion  and  the  reported  net  income  of  the  Railroad  Administration,  less  the  amount 
or  the  federal  rental,  has  been  taken  as  the  actual  net  income  of  the  road 


84 

Katios  for  the  steam  railroad  group  have  been  worked  out  for 
all  the  railroads  in  the  State,  therefore,  on  the  basis  of  figures 
covering  eight  years  (1911-1919,  inclusive,  excluding  1916). 
Total  tax  receipts  have  been  compared  with  total  gross  earnings, 
expenses,  and  net  income  for  this  period.  The  ratios  of  taxes 
to  gross  earnings  and  operating  expenses  have  been  based  upon 
returns  from  the  operating  companies  only.  In  securing  the  total 
net  income  of  all  the  railroad  companies  in  the  State,  an  allocated 
portion  of  the  net  income  of  lessor  companies  has  been  added  to 
the  net  income  of  the  operating  companies.* 

Certain  of  the  tables  presented  below  are  based  upon  returns 
from  individual  public  service  corporations.  Steam  railroads  are 
not  included  in  these  tables,  appearing  only  in  the  tables  based 

upon  aggregate  figures. 

Relation  of  Income  to  net  Worth. —  Before  attempting  to 
determine  the  relative  weight  of  the  various  taxes  upon  different 
classes  of  utilities,  something  should  be  known  as  to  the  percentage 
of  corporations  in  each  class  operating  at  a  loss,  and  as  to  the 
general  relation  of  income  to  invested  capital.  The  following  table 
shows,  for  the  sample  group  studied,  the  number  of  corporations 
in  each  class  operating  at  a  profit  and  operating  at  a  loss  during 
the  ten-year  period  1911-1920: 

*  The  aUocation  basis  for  lessor  roads  was  main  track  mileage,  the  basis  employed 
for  operating  roads. 


35 

TABLE  17 

Summary  of   Public    Service   Corporations   in   New   York 

State 

The  records  of  which  were  examined  hy  the  Joint  Legislative  Committee  on, 
,  Taxation   and   Retrenchment 

Number  Number 

operating  at  operating  at 

a  profit  (1.  e..  a  loss  (i.  e.. 

Total         reporting  reporting  an 

Number     an  average  Percentage        average       Percentage 

of  cor-       net  income,  operating           deficit,         operating 

Class  of  utility                   porations     1911-1920)  at  a  profit      1911-1920)      at  a  loss 

Steam    Railroads*     60  43  71.5  17  28.5 

Electric   Railways    56  34  60.7  22  30.3 

Telephone  and  Telegraph  66  62  94.0  4  6.0 

Gus  and  Electric: 
Electric      Light      and 

Power    50  45  90.0  5  10.0 

Gas  and  Electric  (com- 
bined)      22  1»  86.5  3  13.5 

Coal    Gas    and    Water 

Gas    18  15  83.5  3  16.5 

Natural   Gas    1«  t  18  100. 0     

Total  Gas  and  Electric.  108  1 97  80.8  11  10.2 
Grand  Total,  Public  Ser- 
vice Corporations 290              236             81.5                54  18.5 

Efforts  have  been  made  to  make  the  above  samples  as  repre- 
sentative of  the  different  classes  of  utilities  as  possible.  In  making 
the  first  selection,  all  corporations,  the  records  of  which  seemed 
complete  for  ten  years,  as  reported  by  the  Public  Service  Com- 
mission, were  included.  The  inadequate  character  of  some  of 
the  records  made  it  necessary  to  exclude  certain  of  these  corpo- 
rations. In  some  cases  corporations  having  partially  complete 
records  were  included,  the  average  being  worked  out  for  a  slightly 
shorter  period. 

It  is  apparent  from  the  figures  given  that  certain  classes  of 
utilities  are  much  better  off  than  others  and  that  the  utilit}^  group 
as  a  whole  is  not  in  as  strong  a  position  as  the  financial  institutions 
studied  in  the  preceding  section.:}:  Thirty-nine  per  cent  of  the 
electric  railways  operated  at  a  loss  during  the  decade  1911—1020, 

*  Based  upon  reports  from  60  operating  steam  railroads  for  the  period  covered. 
C/.  supra,  pp.  33,  34. 

t  This  figure  includes  one  company  the  net  worth  of  which  was  a  negative 
figure ;  it  is  included  since  it  showed  a  positive  net  income. 

%  CJ.  supra,  pp.  17,  18.  Of  the  total  number  of  financial  institutions  reportin  g 
only  six  showed  an  average  deficit  for  the  period  1918-1920.  This  Is  a  shorter 
period,   of  course,  than  that  covered  by  the  utility  figures. 

Note.—  This  statement  does  not  include  a  number  of  public  service  corporations 
the  records  of  which  were  examined  by  the  committee  for  the  ten-year  period, 
1911-1920,  but  which  were  inadequate  for  the  purposes  of  the  committee. 


*^, 


36 


37 


while  G  per  cent  of  the  telephone  and  telegraph  corporations 
showed  a  net  loss  during  this  period.  Of  the  utility  group  as  a 
whole,  18.5  per  cent  showed  an  average  loss  for  this  period.  The 
number  in  each  class  operating  at  a  deficit  is  shown  in  the  detailed 
tables  which  follow.  The  majority  of  the  corporations  failing 
to  show  a  profit  are  small  companies. 

These  facts  should  be  borne  in  mind  in  considering  the  tax 
figures  presented.*  For  apart  from  the  absolute  size  of  the  taxes, 
the  losses  suffered  by  some  companies  serve  to  increase  materially 
the  average  percentage  of  net  income  paid  in  taxes.  In  the  tables 
dealing  only  with  the  profitable  companies  this  difficulty  is  not 
present. 

For  the  corporations  reporting  an  average  profit  for  the  period 
here  studied,  the  relation  of  net  income  to  net  worth  is  shown  by 
classes  in  the  detailed  tables  following. f 

TABLE  18 

Relation  of  Net  Income  to  JSTet  Worth,  Electric  Railways 

IN  New  York  State 

Frequency  Table  Based  upon  the  Average  Annual  Net  Income  and  the  Average 

Net   Worth  During   the  Period    1911-1920 

Percentage  relation,  net  income  to  net  worth 

Electric  Railways  reporting  from  New  York  State 


Num- 
ber 
in 

class 

Number 

showing 

deficit 

Number  Earnino 

CLASS 

Less 
than 

2% 

2% 

to 

3.9 

4% 

to 

5.9 

6% 

to 

7.9 

8% 

to 

9.9 

10% 

to 

11.9 

12% 

to 

13.9 

A 
Operating  revenue  $1,000,000  or 
over 

10 
27 
19 

3 

8 
11 

1 
7 

4 

1 
2 
2 

1 
4 
2 

2 
2 

1 

1 
2 

B 
Operating  revenue  $100,000  to 
$999,999 

1 

C 

Operating    revenue    less    than 
$100,000 

1 

Total 

56 

22 

12 

5 

7 

4 

1 

3 

2 

•  As  was  explained  above,  the  net  income  on  which  these  results  are  based  is  net 
income  before  any  taxp.s  have  been  deducted. 

t  As  explained  above,   steam  railroads  are  not  included  in  the  freauencv  tablps 

based  upon  returns  from  individual  corporations.  t«u't3» 


TABLE  19 

Relation  of  Xet  Income  to  Net  Worth,  Telephone  and 
Telegraph  Corporations  in  New  York  State 

Frequency  Table  Based  upon  the  Average  Annual  Net  Incoine  and  the  Average 

Net   Worth  During   the  Period   1911-1920 

Percentage  relation,  net  income  to  net  worth 
Telephone  and  Telegraph  Corporations  reporting  from  New  York  State 


Num- 
ber 
in 
class 

Number 

showing 

deficit 

Nxtmber  Earning 

CLASS 

Less 
than 

2% 

2% 

to 

3.9 

4% 

to 

5.9 

6% 

to 

7.9 

cor 

o     0 

to 
9.9 

10% 

to 
11.9 

12% 

to 
13.9 

14% 

to 
15.9 

16% 

to 
17.9 

18% 

to 

19.9 

24% 

tu 

25.9 

Class  A 

Operating  revenue 
$1,000,000  or  over. 

2 

0 

.    , 

,    . 

1 

1 

.. 

.. 

■  •  • 

Class  B 

Oneratine  revenue 
$100,000  to  $999 ,999 

7 

0 

.... 

2 

1 

2 

1 

1 

.. 

•  ■  • 

Class  C 

Operating  revenue 
$25,000  to  $99,999 

10 

0 

.... 

,   . 

.    , 

.    . 

3 

1 

2 

1 

1 

1 

1 

Class  D 

Operating  revenue 
$10,000  to  $24,999 

29 

2 

.... 

1 

4 

8 

4 

4 

2 

2 

1 

1 

•  •  • 

Class  E 

Operating  revenue 
less  than  $10,000. . 

18 

2 

1 

4 
7 

5 

9 

4 
13 

1 
9 

8 

5 

1 
4 

3 

2 

Total 

66 

4 

1 

1 

mm- 


TABLE  20 

Relation  of  li^BT  Income  to  ]^et  Worth,  Electeic  Light 
AND  Power  Corporations  in  I^ew  York  State 

Frequency  Tables  Based  upon  the  Average  Annual  Net  Income  and  the  Average 

•\et  Worth  During  the  Period  1011-1920 

Percentage  relation,  net  income  to  net  worth 

Electric  Light  and  Power  Corporaticy>xs  reporting  from  New  York  State 


CLASS 


Operating  revenue  $1,- 
000,000  or  over 


Operating  revenue  $100- 
000  to  $999,999 


Operating  revenue  $25,- 
000  to  $99,999 


Num- 
ber 
in 
class 


Number 

showing 

deficit 


Number  Earning 


8 


22 


15 


D 

Operating  revenue  less 
than  $25,000 


Total. 


Less 
than 

2% 


2% 

to 

3.9 


4% 

to 

5.9 


6% 

to 

7.9 


50 


1 
3 


8% 

to 

9.9 


10% 

to 
11.9 


12% 

to 

13.9 


14% 

to 

15.9 


16% 

to 

17.9 


10  I     8 


CLASS 


Num- 
ber 
in 

class 


A 

Operating  revenue  $1,000,000  or 
over 

B 
Operating  revenue  $100,000  to 
$999,999 

Total 


8 


14 


22 


WS^ 


TABLE  21 
Eelation  of  'Net  Income  to  Net  Worth,  Gas  and  Electric 

Corporations  in  New  York  State 
(Combming  gas  and  electric  service.) 

Frequency  Table  Based  upon  the  Average  Annual  Net  Income  and  the  Average 

Net   Worth  During   the  Period    1911-1920 

Percentage  relation,  net  income  to  net  worth 

Pas  and  ElectHc  Corporations  reporting  from  New  York  State 


Number 

showing 

deficit 


Less 
than 
2% 


4% 

to 

5.9 


39 


TABLE  22 

Relation   of   Net   Income  to  Net  Worth,  Manufactured 

Gas  Companies  in  New  York  State 

Frequency  Table  Based  upon  the  Average  Annual  Net  Income  and  the  Average 

Net   Worth  During   the  Period   1911-1920 

Percentage  relation,  net  income  to  net  worth 
Manufactured  Gas  Companies  reporting  from  New  York  State 


class 


Operating  revenue'$l  ,000,000 
or  over 


B 

Operating  revenue  $100,000 
to  $999,999 


Num- 
ber 
in 
class 


Number 

showing 

deficit 


Number  Earning 


1% 

to 

1.9 


Operating    revenue    $25,000 
to  $99,999 


D 

Operating  revenue  less  than 
$25,000 

Total 


18 


2% 

to 

2.9 


3% 

to 

3.9 


2 

3  I     2 


5% 

to 

5.9 


6% 

to 

6.9 


2        1 


7% 

to 

7.9 


8% 

to 

8.9 


10% 

to 

10.9 


12% 

to 

12.9 


14% 

to 

14.9 


40 


41 


TABLE  23 

Relatio.x  of  'Net  Income  to  I^et  Worth,  J^atural  Gas  Com- 
panies IN  New  York  State 

Frequency  Table  Based  upmi  the  Average  Annual  Net  Income  and  the  Average 

Net   Worth   During    the   Period    1911-1920 

Percentage  relation,  net  income  to  net  worth 
Natural  Gas  Companies  reporting  from  Neio  York  State 


Number  Earning 

Num- 
ber 
in 

class 

CLASS 

Less 
than 
2% 

2% 

to 

3.9 

4% 

to 

5.9 

6% 

to 

7.9 

8% 

to 

9.9 

1 

10% 

to 

11.9 

12% 

to 
13.9 

1 

14% 

to 
15.9 

16% 

to 

17.9 

Operating  revenue  $1,000,000  or  over. . . 

2 

Operating  revenue  $100,000  to  $999,999. 

6 

.... 

2 

. . 

1 

1 

1 

1 

c 

Operating  revenue  $25,000  to  $99,999. . . 

6 

.... 

1 

.  . 

2 

1 

1 

,    , 

,    ^ 

1 

D 

Operating  revenue  less  than  $25,000 

3 

1 

1 

1 

,   , 

3 

1 

Total 

17 

1 

2 

3 

' 

2 

1 

2 

TABLE  24 

Relation   of    Net    Income    to    Net   Worth,    All   Gas   and 
Electric  Companies  in  New  York  State 

Frequency  Table  Based  upon  the  Average  Annual  Net  Income  and  the  Average 

Net   Worth  During   the   Period    1911-1920 

Percentage  relation,  net  iRCome  to  net  worth 

All  Gas  and  Electric  Companies  reporting  from  New  York  State 


CLASS 


Num- 
brr 
in 

class 


Operating  revenue  $1,000,000 
or  over 20 


Number 

showing 

deficit 


NiTMBBB  Earning 


Less 
than 
2% 


B 

Operating  revenue  $100,000  to 
$999,999 


Operating  revenue  $25,000  to 
$99,999 


Operating  revenue  less  than 
$25,000 


Total 


51 


26 


10 


107 


2% 

to 

3.9 


2       2 


4 
11 


4% 

to 

5.9 


6% 
to 
7.9 


8% 

to 

9.9 


10% 

to 

11.9 


1       3 


3       5       6 


11 


12% 

to 

13.9 


14% 

to 

15.9 


16% 

to 

17.9 


5  I    2 


13 


16 


15 


12 


18% 

to 

19.9 


22% 

to 

23.9 


1  1 


The  marked  variation  in  each  group  in  the  return  upon  capital 
invested  is  apparent.  Electric  railroads,  excluding  those  oper- 
ating at  a  loss,  show  a  marked  concentration  in  the  group 
earning  less  than  2  j3er  cent,  though  one  company  earned  as  much 
as  13  per  cent  on  its  net  worth.  The  rates  of  return  earned  hy 
telephone  and  telegraph  companies  extend  from  less  than  2  per 
cent  to  25  per  cent,  the  largest  single  group  being  made  up  of 
companies  earning  from  6  per  cent  to  8  per  cent.  The  range  for 
gas  and  electric  companies  extends  to  23  per  cent,  the  largest  single 
class  being  those  earning  from  8  per  cent  to  10  per  cent  over  the 
ten-year  period  covered. 

The  meaning  of  net  income  and  net  worth  should  be  kept  in 
mind  in  using  these  figures.  Net  income  is  income  before  taxes 
have  been  deducted  and  net  worth  is  a  book-keeping  figure,  the 
sum  of  capital,  surplus  and  undivided  profits. 


42 


^ 


In  the  following-  tables  the  median  value  of  the  ratio  of  net 
income  to  net  worth  is  presented  for  each  class  of  utility.  In  the 
first  table  this  average  has  been  computed  when  all  companies  in 
a  given  class  have  been  included,  while  in  the  second  table  only 
those  operating  at  a  profit  have  been  included. 


TABLE  25 
Average  Ratio  of  ISTet  Income  to  !N'et  Worth 

Public  Service  Corporations  in  New   York  State,   1911-1920 

r,„I^  average  employed  in  each  ease  is  the  median;  thus  one-half  of  the  total 
number  of  corporations  included  in  each  of  the  given  groups  earned  more  than 
the  given  percentage  on  their  net  worth,  while  one-half  earned  less. 

Average  Ratio,  Net  In- 
come to  Net  Worth 
(expressed  as  a  per- 
centage relation) 


Class  of  Utility 

Electric  Railways 

Telephone  and  Telegraph 

Gas  and  Electric: 
Electric   Light  and   Power 
Gafi     and     Electric     (com- 
bined )    

Gas  (manufactured)    

Gas    (natural )    

Total  Gas  and  Electric 


Number  of  Corpora- 
tions Included 


66 
•66 


1.0 

7.85 


50 

22 

18 

*17 


10.0 

8.0 
6.5 
8.33 


107 


8.44 


♦  One  company  has  been  excluded  because  its  net  worth  was  a  negative  figure. 


43 

TABLE  26 
Average  Ratio  of  Net  Income  to  Net  Worth 

Public  Service  Corporations  Operating  at  a  Profit,  1911-1920 
(Excluding   corporations   showing  a   deficit) 


Class  of  Utility 

Electric    Railways    

Telephone  and  Telegraph 

Gas  and  Electric; 
Electric  Light  and  Power. 
Gas     and     Electric     (com- 
bined ) 

Gas    (manufactured)     .... 
Gas  ( natural )    

Total  Gas  and  Electric 


Number  of  Corpora- 
tions Included 


45 

19 
15 
17 


Average  Ratio,  Net  In- 
come to  Net  Worth 
(expressed  as  a  per- 
centage relation) 

34  4.00 

62  8.00 


10.5 

8.75 

6.6 

8.33 


96 


9.12 


These  tables  show  the  median  return  to  the  electric  railways 
to  be  lowest,  but  1.0  per  cent  upon  net  worth,  while  gas  and 
electric  companies  show  the  highest  median  return,  8.44  per  cent 
of  net  worth.  These  rates  are  of  course  higher  when  companies 
operating  at  a  loss  are  excluded,  as  in  the  second  table,  though 
the  relative  standing  of  the  different  classes  is  unchanged. 

The  characteristics  of  the  median  have  been  explained  above.* 
In  the  present  case  the  large  number  of  small  companies  earning 
small  returns,  serve  to  make  the  median  value  low.  The  condition 
of  the  larger  companies  is  brought  out  more  clearly  by  a  ratio 
based  upon  aggregate  net  income  and  aggregate  net  worth.  In 
computing  this  ratio  the  actual  income  and  net  worth  figures  of 
all  the  corporations  have  been  added,  and  the  relation  of  net 
income  to  net  worth  computed  from  these  aggregate  figures.  The 
following  table  gives  the  ratios  so  computed. 

•  Supra,  pp.  20,  21. 


44 

TABLE  27 
Ratio  of  Aggkegate  jSTet  Income  to  Aggregate  ^Net  Woktii 

Public  Service  Corporations  in  New  York  State,  1911-1920 

The  ratio  for  each  class  is  the  percentage  relation  of  acffreeate  net  inonrn. 
to  aggregate  net  worth.  The  aggrcffate  fil^refl  ii  Jh  «Lrl  ^^^^^^^  "f*  income 
averages  for  each  of  the  corpofSs  incM^^^^  *'"  '^"  '^"  ^^  ^^-^^^^ 

I  ^**?®     o^     Aggregate 

Net   Income  to  Ag- 

tions  included  centage  relation) 

Electric   Railways    ^ 

Telephone  and  Telegraph gg  ^'^^ 

Gas  and  Electric:  ^'^^ 

Electric  Light  and  Power . .  50  9  g^ 

Gas     and     Electric     (com- 

^^"^)     22  8  6 

Gas    (manufactured)     ig  ' 

Gas    (natural)     ig  ^'^^ 

Total  Gas  and  Electric iao 

^  9.68 

^  The  above  ratios  are  based  upon  reports  from  all  the  corpora- 
tions m  each  class  including  those  operating  at  a  loss  The  pre- 
ponderant influence  of  the  large  companies  which  are,  on  the 
whole,  more  profitable,  serves  materially  to  increase  the  rates  as 
compared  with  the  median  values.  It  is  clear  from  these  as  well 
as  from  the  earlier  figures  that  there  is  a  wide  variation  in  the 
return  earned  upon  net  worth.  Electric  railways  show  an  average 
return  of  3.47  per  cent,  while  gas  and  electric  companies  earn 
on  the  average,  9.68  per  cent  on  net  worth.*  ' 

^  The  relative  standing  of  the  different  classes  of  public  utilities 
IS  the  same  m  the  table  shown  below,  in  which  the  ratios  are  based 
upon  returns  from  profitable  companies  only. 


45 


TABLE  28 
Katio  of  Aggregate  !N"et  Income  to  Aggregate  Xet  Worth 

Public  Service  Corporations  Operating  at  a  Profit,  1911-1920 
(Excluding  corporations   showing   a  deficit) 

The  ratio  in  each  class  is  the  percentage  relation  of  aggregate  net  income 
to  aggregate  net  worth.  The  aggregate  figures  used  are  the  sums  of  ten-year 
averages  for  each  of  the  corporations  included. 


Class  of  Utility 

Electric   Railways    , 

Telephone  and  Telegraph 

Gas  and  Electric: 

Electric  Light  and  Power . . 
Gas     and     Electric     (com- 
bined )    

Gas     (manufactured ) 

Gas    ( natural )    

Total  Gas  and  Electric 


The  electric  railway  figure  is  materially  higher  in  this  table 
but  the  other  ratios  are  approximately  the  same.  The  slight 
change  resulting  from  the  elimination  of  the  companies  operating 
at  a  loss  is  due  to  the  fact  that  these  companies  are,  in  the  main, 
small  and  affect  the  aggregate  figures  but  slightly.  For  many 
purposes  it  is  desirable  that  the  small  companies  should  not  be 
given  too  much  weight,  and  for  this  reason  the  tables  based  upon 
aggregates  are  of  value. 

The  variation  in  earning  power  revealed  above  in  the  compari- 
son of  different  types  of  utilities  is  found  to  prevail  within  each 
class  when  a  division  on  the  basis  of  size  is  made.  The  fol- 
lowing table  gives  ratios  of  aggregate  net  income  to  aggregate 
net  worth,  by  classes,  for  different  types  of  public  service 
corporations. 


Number  of  Corpora 
tions  Included 

i- 

Ratio      of     Aggregate 
Net   Income   to   Ag- 
gregate  Net    Worth 
(expressed  as  a  per- 
centage relation) 

34 

4.66 

62 

9.27 

46 

9.87 

19 

9.17 

15 

10.1 

18 

9.18 

97 

9.76 

i^ 


46 


47 


TABLE  29 
Ratio  of  Aggbegate  Net  Ii^come  to  Aggregate  Net  Wobth 

Pubhc  Se^ice  Corporations  in  Xe«,   York  State,  by  Clm.e, 
(Katio  expressed   as   a   percentage  relation) 


Class  A. 
Class  B. 
Class  C. 
Class  D. 
Class  E . 


Electric 
railways 


Telephone 

and 
telegraph 


3.9 
1.6 
Negative 


9.3 
8.8 
12.6 
6.4 
3.7 


Electric 

light 

and 

power 


Gas 
and 
electric 
(com- 
bined) 


Manufac- 
tured 
gas 


9.9 
9.7 
8.8 
Negative 


9.2 
6.7 


Natural 
gas 


11.8 
4.8 
4.6 
Negative 


9.6 
8.5 
8.2 
2.4 


Total 
gas  and 
electric 


10.0 

7.9 

7.9 

Negative 


beSS  -  ^-- -- -  ^o^^^  pro.  or  at  a  loss,  have 

The  return  upon  the  investment  is  obviously  greater  for  the 

arge  companies  than  for  the  small  ones.     The  one  exception  to 

this  IS  found  among  the  telephone  companies,  where  the  Class  C 

companies  show  a  greater  proportionate  return  than  do  the  larirer 

corporations. 

Relative  Tax  Burden  Within  the  Public-Utility  Groups  - 

ihe  materials  presented  above  have  indicated  the  extent  of  the 
variation  m  earnings  among  public  service  cor]>orations.  A  lar-c 
percentage  in  some  of  the  classes  show  an  absolute  deficit  durin- 
the  period  1911-1920.  Others,  and  particularly  the  larger  corixT- 
rations,  have  earned  adequate  returns  upon  their  investment. 
Ihis  variation  m  earning  power  means,  of  necessity,  that  the 
burden  of  taxes  has  been  unequal.  Our  present  problem  is  to 
determine  the  degree  of  inequality. 

The  variety  of  taxes  paid  by  each  class  of  utilitv  renders  the 
problem  more  complex  and  more  difficult  than  that  encountered 
m  studying  the  tax  burden  upon  financial  institutions.    Inasmuch 
as  many  of  the  ratios  given  are  based  upon  the  total  taxes  paid 
by  utilities,  it  is  essential  to  determine  the  relative  imi^rtance 
of  the  different  types  of  taxes  paid  by  each  class.     The  absolute 
figures  have  been  presented  in  Table  1  above.     The  following 
table  presents  the  same  facts  upon  a  percentage  basis.     All  the 
taxes  paid  by  each  class  of  utility  constituting  100,  this  table 
shows  the  percentage  of  the  total  paid  in  meeting  each  of  the 
specific  taxes  levied. 


o 


QO 
Oi 


m 

M 

H 

M 

Hi 
M 

H 

u 

O 

M 

h) 

P 
Ph 

CO      o 


M 


%^ 

o 

125 
O 

M 

H 
P 
pq 

M 

H 

CO 


PU| 


/-\   flj   t-^    r;   m    3 


b  ^  c 


d   OniS    U 


02.2 


n 


3-i  g.2 

QQ 


.1.2 


m 


p 
o 

m 
< 


Total 
State 

CO     oo<©ot* 

Capital 
stock 

Total 

gross 

earnings 

and  excess 

dividends 

ooo 

Excess 
divi- 
dends 

o 

(NO 

Gross 
earn- 
ings 

y-i      b»000000 
«      C  t^  1©  ?o 

Total 

general 

property 

and 

special 

franchise 

O        COQOOCO 

to      WOt^N 

CO       OM  ^  >0 


•*    ^  d  cs  ■<i* 


Special 
fran- 
chise, 
tangi- 
ble 

®     ^eoioi-t 

o     aoco»o»-H 

<NCO(NW 

Total 
general 
prop- 
erty 

79.1 

36.9 
28.9 
46.3 
54.1 

Per- 
sonal 
prop- 
erty 

Real 
prop- 
erty 

CO          T«1<IC^O 

00        CO  00  O  CO 

I 

Si 
3 
go 

c 
a 


00 

ag  ^ 


u  o-a 
CO  2 


Si 


C^S 


•*  4j  d  o 


48 

Steam  railroads,  it  appears,  pay  78.6  per  cent  of  their  total  taxes 
m  .\ew  lork  State  on  real  property.     If  the  tangible  properties 
in  the  streets,  taxed  with  the  special  franchises,  are  included, 
88  per  cent  of  the  total  is  paid  in  property  taxes.    The  last  column 
m  the  table  presents  what  is  perhaps  the  most  significant  figure. 
Total  taxes  paid  to  the  State  (on  gross  earnings  and  capital  stock) 
when  combined  with  the  taxes  paid  on  intangible  elements  in  the 
special  franchise  valuations  constitute  11.3  per  cent  of  all  the 
ta^es  paid  by  steam  railroads.     It  is  this  part  of  the  tax  payment 
which  IS  directly  comparable  with  the  bank  stock  or  franchise  tax 
paid  by  financial  institutions  and  the  4%  per  cent  tax  on  net 
income  paid  by  business  corporations. 

This  particular  percentage  is  lowest  in  the  case  of  steam  rail- 
roads. For  electric  railways  the  sum  of  State  taxes  and  taxes  on 
mtangible  elements  in  the  special  franchise  constitutes  .35.0  per 
cent  of  the  total  taxes  paid,  for  telephone  and  telegraph  corpora- 
tions 37.6  per  cent,  for  gas  and  electric  companies  28.2  per  cent 
and  for  the  entire  public  utility  gi-oup  24.8  per  cent  of  total  tax 
payments.  These  percentages  should  be  borne  in  mind  when  the 
tax  ratios  are  being  studied. 

For  the  purpose  of  studying  the  relative  burden 'of  taxes  within 
the  public  utility  group  as  a  whole,  three  standards  have  been 
utilized,  gross  earnings  from  2vew  York  business,  operating 
expenses  in  Is^ew  York  State,  and  net  income  from  New  York 
business.  Taxes  paid  in  Xew  York  have  been  compared  with 
each  of  these  standards. 

In  the  case  of  corporations  doing  an  interstate  business,  it  has 
been  necessary  to  allocate  part  of  the  total  gross  earnings,  oper- 
ating expenses  and  net  income  to  :N'ew  York.     The  basis  of  alio 
cation  has  been  main  track  mileage  in  the  case  of  steam  railroads 
and  electric  railways.     In  the  case  of  telephone  companies  doing 
an  interstate  business,  the  general  allocation  basis  has  been  that 
set  forth  in  Art.  9,  §  182  of  the  Tax  Law,  based  upon  the  location 
of  gross  assets,  though  for  certain  purposes  wire  mileage  and  num- 
ber of  stations  have  been  used.     The  interstate  element  is  not 
important  enough  in  the  business  of  gas  and  electric  companies 
to  give  rise  to  an  allocation  problem. 


49 

Kelation  of  Taxes  to  Gross  EarnIxXgs. —  In  the  following 
rabies  the  relations  of  total  State  and  local  taxes  to  gross  earnings 
from  New  York  business  are  shown,  in  the  form  of  fiequency 
tables,  for  the  different  classes  of  public  service  corporations.  The 
tables  are  base.d  upon  the  samples  studied. 

TABLE  31 
Relation  of  Total  State  and  Local  Taxes  to  Gkoss  Earn- 
ings, Electric  Railways  in  !N'ew  York  State 

Frequency   Table   Based   upon    the  Averacfe   Annual   Tax   Paffments   and   the 
Average  Annual   Gross  Earnings  During   the  Period   1911-1920 

Percentage  of  gross  earnings  paid  in  total  State  and  local  taxes 
Electric  Railways  reporting  from  Netc  York  State 


Num- 
ber 
in 

class 

Number  Paying 

CLASS 

Less 
than 

2% 

2% 

to 

3.9 

4% 

to 

5.9 

6% 

to 

7.9 

8% 

to 

9.9 

10% 

to 

11.9 

12% 

to 

13.9 

14% 

to 
15.9 

A 

Operating  revenue  $1,000,000 
or  over 

10 
27 
19 

.... 

6 

7 

4 
12 
10 

3 
5 

1 

2 

3 

1 

1 

B 

Operating  revenue  $100,000  to 
$999,999 

C 

Operating    revenue    less    than 
$100,000 

1 

Total 

56 

13 

26 

.9 

2 

3 

1 

2 

ilBk 


50 

TABLE  32 

reinf :f:  riZr^^^^^^^^  'r'  ^^  *^^^^  ^^^^  -<^  ^-^  taxes 
__        /^  na  lelegraph  Corporattons  reportingfrom  NewYork  State 


CLASS 


I  Num- 1 
ber    '- 


Number  Paying 


m 
class 


Operating  revenue  $1,000,000  or  over. 


B 


Operating  revenue  $100,000  to  $999,999. 
Operating  revenue  $25,000  to  $99.999. . 

Operating  revenue  $10,000  to  $24,999 .... 

E 

Operating  revenue  less  than  $10,000 

Total 


Less 
than 

1% 


1% 

to 

1.9 


2% 

to 

2.9 


10 

29 

18 
66 


3% 

to 

3.9 


4% 

to 

4.9 


5%  I  6% I  7% 
to  I  to  I  to 


5.9 


2 

7 


6.9 


9 


19 


11 

4 
22 


7.9 


8% 

to 

8.9 


2 
10 


TABLE  33 

Yoh;  S™    ^^^^^    -^    ^---    COHPO...O.S    X.    I..W 


Operating   revenue  $1,000,000  or 
over 


^$999!999  '■^''''"''®    »100.000   to 


^^'9999     '®^®'^"«    $25,000     to 


^%?.000      '"®''*''  ®     ^®*'     *^*° 


51 

TABLE  34 

Relation  of  Total  State  and  Local  Taxes  to  Gross  Earn- 
ings, Gas  and  Electric  Corporations  in  New  York  State 

.(Combining  gas  and  electric  service.) 

Frequency   Table   Based  upon   the  Average  Annual   Tax   Payments   and   the 
Average  Annual   Gross  Earnings  During   the  Period   1911-1,920 

Percentage  of  gross  earnings  paid  in  total  State  and  local  taxes 

Gas  and  Electric  Corporations  reporting  from  New  York  State 


Num- 
ber 
in 

class 

Number  Patxno 

CLASS 

2% 

to 

2.9 

3% 

to 

3.9 

4% 

to 

4.9 

5% 

to 

5.9 

6% 

to 

6.9 

7% 

to 

7.9 

9% 

to 

9.0 

A 

Operating  revenue  $1,000,000  or  over. 

B 
Operating  revenue  $100,000  to  $999,999 

8 
14 

•  •    •    • 

1 

3 

2 
6 

2 

1 

1 
2 

2 

1 

1 

Total 

22 

1 

3 

8 

3 

3 

3 

1 

TABLE  35 
Relation  of  Total  State  and  Local  Taxes  to  Gross  Earn- 
ings, Manufactured  Gas  Companies  in  'New  York  State 

Frequency   Table   Based   upon   the  Average  Annual   Tax  Payments  and   the 
Average  Annual   Gross  Earnings  During   the   Period   1911-1920 

Percentage  of  gross  earnings  paid  in  total  State  and  local  taxes 

Manufactured  Gas  Corporations  reporting  from  New  York  State 


Number 

in 

class 

Number  Paying 

class 

27c 

to 

2.9 

3% 

to 

3.9 

4% 

to 

4.9 

5% 

to 

5.9 

6% 

to 

6.9 

7% 

to 

7.9 

A 
Operating  revenue  $1,000,000 
or  over 

2 
9 
5 
2 

1 

3 

1 

2 
3 
5 

1 
1 

B 

Operating    revenue   $100,000 
to  $999.999 

c 

Operating  revenue  $25,000  to 
$90,999 

1 

d 

Operating  revenue  less  than 
$25,000 

•  •  •  •  •       •  ■ 

Total 

18 

1 

3 

1 

10 

2 

1 

52 


5a 


TABLE  36 
Kelation  of  Total  State  and  Local  Taxes  to  Gross  Earn- 
ings, :N"aTURAL  GrAS  COMPANIES  IN  jS'ew  YoRK  State 

Frequency   Table  Based   upon    the  Average   Annual   Tax  Payments   and   the 
Average  Annual  Gross  Earnings  During   the  Period   1911-1920 

Percentage  of  gross  earnings  paid  in  total  State  and  local  taxes 

Natural   Gas   Corporations  reporting  from  New   York  State 


Number  Patino 

Num- 
ber 

' 

CLASS 

1 

m 
class 

Less 

than 

1% 

1% 

to 

1.9 

2% 

to 

2.9 

3% 

to 

3.9 

4% 

to 

4.9 

5% 

to 

5.9 

7% 

to 

7.9 

8% 

to 

8.9 

9% 

to 

9.9 

A 

Operating  revenue  <1, 000 ,000  or  over.  .  . 

2 

1 

1 

•  ■   • 

B 

Operating  revenue  JIOO.OOO  to  $999,999 . 

6 

1 

2 

1 

2 

•   •   • 

C 

Operating  revenue  $25,000  to  $99,999.  .  . 

7 

3 

1 

1 

1 

1 

D 

Operating  revenue  less  than  25,000 

3 

.... 

,   , 

1 

1 

,    , 

.. 

1 

Total 

18 

2 

1 

3 

5 

1 

2 

1 

1 

2 

TABLE  37 

Relation  op  Total  State  and  Local  Taxes  to  Gross  Earn- 
ings, All  Gas  and  Electric  Companies  in  'N'ew  York 
State 

Frequency   Table   Based  upon   the  Average   Annual   Tax   Payments   and   the 
Average  Annual  Gross  Earnings  During   the  Period   1911-1920 

Percentage  of  gross  earnings  paid  in  total  State  and  local  taxes 
All  Gas  and  Electric  Companies  reporting  from  New  York  State 


Nu.MBER  Paying 

Num- 
ber 
in 

class 

CLASS 

Less 

than 

1% 

1% 

to 

1.9 

1 

2% 

to 

2.9 

1 

3% 

to 

3.9 

4% 

to 

4.9 

5% 

to 

5.9 

6% 

to 

6.9 

3 

7% 

to 

7.9 

8% 

to 

8.9 

9% 

to 

9.9 

2 

12% 

to 

12.9 

1 

44% 

to 
44.9 

A 

Operating     revenue    $1,- 
000,000  or  over 

20 

1 

3 

5 

2 

1 

B 

Opeiating  revenue  $100.- 
000  to  $999,999 

51 

1 

3 

4 

12 

14 

9 

4 

4 

C 

Operating  revenue  $25,000 

to  $99,999 

27 

2 

5 

7 

7 

2 

1 

1 

2 

D 

Operating     revenue     less 
than  $25,000 

10 

1 
5 

2 
9 

4 
21 

24 

21 

1 
10 

7 

•  • 

2 

1 
5 

•  • 

1 

1 

Total 

108 

2 

1 

it  is  apparent  that  when  the  standard  of  gross  earnings  is  used 
i\  wide  variation  in  relative  tax  burden  is  found.  Electric  rail- 
ways show  a  range  of  14  per  cent,  from  2  per  cent  to  16  per  cent, 
with  a  marked  concentration  in  the  group  paying  from  4  per  cent 
to  6  per  cent  of  gross  earnings  in  taxes.  Telephone  and  telegraph 
corporations  pay  from  1  per  cent  to  9  per  cent  of  their  gross  earn- 
ings in  taxes,  the  largest  single  group  paying  from  4  per  cent  to 
5  per  cent.  The  range  of  gas  and  electric  companies  is  from  less 
than  1  per  cent  to  45  per  cent,  the  largest  class  being  that  paying 
from  4  per  cent  to  5  per  cent. 


54 


55 


These  tables  arc  summarized  below,  an  average  value  being 
picked  out  for  each  class  of  utility.  The  average  selected  is  the 
median,  the  use  of  which  has  been  explained  above. 

TABLE  38 

AvEEAGE  Ratio  of  Total  State  and  Local  Taxes  to  Gross 

Earnings 

Public  Service  Corporations  in  New   York  State,   1911-1920 

The  average  employed  in  each  case  is  the  median ;  thus  one-half  of  the  total 
number  of  corporations  included  in  each  of  the  given  groups  paid  more  than 
the  given  percentage  of  their  gross  earnings  in  meeting  the  taxes  named,  while 
one-half  paid  less. 


Number 
tions 

of  Corpora- 
Included 

Average    Ratio,    Total 
State      and      Local 
Taxes       to       Gross 
Earnings  (expressed 
as  a  percentage  re- 
lation) 

56 

5.15 

67 

4.27 

50 

• 

4.5 

22 

4.87 

18 

5.40 

18 

3.60 

108 

4.71 

Class  of  Utility 

Electric  Railways    

Telephone    and    Telegraph .  . 
Gas  and  Electric: 

Electric  Light  and  Power 
Gas     and     Electric      (com- 
bined )     

Gas    (manufactured)    .  . 
Gas  (natural)    

Total  Gas  and  Electric. . . 


Accepting  the  median  value  as  representative,  it  is  seen  that 
the  typical  electric  railway  paid  5.15  per  cent,  the  typical 
telephone  and  telegraph  company  4.27  per  cent,  and  the  typical  gas 
and  electric  company  4.71  per  cent.  The  electric  railway  group 
shows  the  highest  average  found  in  the  four  main  classes. 

The  above  figures  describe  the  situation  of  typical  companies 
in  each  class.  It  is  desirable  to  supplement  these  by  ratios  based 
upon  total  tax  payments  and  total  gross  earnings  in  !N'ew  York 
for  each  class  of  utility.  The  following  table  presents  ratios 
based  upon  these  aggregate  figures. 


TABLE  39 

Ratio  of  Aggregate  State  and  Local  Taxes  to  Aggregate 

Gross  Earnings 

Public  Service  Corporations  in  New   York  State,   1911-1920 

The  ratio  for  each  class  is  the  percentage  relation  of  aggregate  State  and 
local  taxes  to  aggregate  gross  earnings^  The  aggregate  figures  used  are  the 
sums  of  ten-year  averages  for  each  of  the  corporations  included.* 


Ratio     of 

Aggregate 

State 

and      Local 

Taxes  to  Aggregate 

Gross  Earnings  (ex- 

Number of  Corpora- 

pressed 

as    a    per- 

Class  of  Utility 

tions 

Included 

centage 

relation ) 

Steam   Railroads    

60 

3.9 

Electric   Railways    

56 

7.24 

Telephone  and  Telegraph 

66 

5.0 

Gas  and  Electric: 

Electric  Light  and  Power . . 

60 

6.9 

Gas     and     Electric     (com- 

bined)     

22 

6.3 

Gas    (manufactured)    

18 

5.5 

Gas    ( natural )    

18 

4.4 

Total  Gas  and  Electric 

108 

6.5 

In  the  above  table  the  ratio  for  steam  railroads  is  lower  than 
for  the  other  utility  groups,  with  telephone  and  telegraph  corpora- 
tions next.  Electric  railroads,  with  a  ratio  of  7.24,  stand  at  the 
upper  limit. 

Relation  of  Taxes  to  Operating  Expenses. —  Another  basis 
of  comparison  which,  like  the  one  preceding,  avoids  some  of  the 
difficulties  involved  in  using  the  net  income  basis,  is  that  of 
operating  expenses.  By  determining  the  relation  of  taxes  to 
operating  expenses  for  different  classes  of  utilities,  it  is  possible 
to  study  the  degree  of  variation  in  tax  burden.  The  tables  immedi- 
ately following  show  the  relation  between  these  two  figures  for  the 
different  utility  groups.  Operating  expenses  are  expenses  allo- 
cated to  New  York  business  on  the  bases  explained  above. 

•  For  the  basis  of  the  steam  railroad  figures,  cf.  supra,  p.  33. 


56 


57 


TABLE  40 

Kelation  of  Total  State  and  Local  T.vxes  to  Opekating 
Expenses,  Electkic  Railways  in  Xew  York  State 

Frequenci/  Table  Based  upon  the  Average  Annual  Tax  Payments  and  Average 
Annual  Operating  Expenses  During  the  Period  1911-1920 

Percentage  of  operating  expenses  paid  in  total  State  and  local  taxes 

Electric  Railways  reporting  from  New  York  State 


CLASS 


Operating  revenue  $1,000,000  or  over. 

B 
Operating  revenue  $100,000  to  $999,999 

C 

Operating  revenue  less  than  $100,000. , 

Total 


Num- 
ber 
in 
class 


10 
27 
19 


56 


Number  Patino 


Less 

than 

6% 


3 

7 

13 


23 


6% 

to 

11.9 


5 

18 
6 


29 


12% 

to 
17.9 


18% 

to 
23.9 


Supplementary  Table:      Detailed  Classification  of  Com- 
panies Paying  Less  than  12  Per  Cent 


class 


a 

B 

c 

Total 


Number 

in 

class 


8 
25 
19 


52 


3% 

to 

3.9 


4% 

to 

4.9 


1 
3 
5 


5% 

to 

5.9 


2 
3 

7 


12 


e% 

to 
6.9 


5 
3 


8 


7% 

to 

7.9 


5 
1 


8% 

to 

8.9 


1 
3 
1 


9%l|10% 
to       to 
9.9   10.9 


1 
3 


11% 

to 

11.9 


TABLE  41 

Relation  of  Total  State  and  Local  Taxes  to  Operating 
Expenses,  Telephone  and  Telegraph  Corporations  in 
New  York  State 

Frequency  Table  Based  upon  the  Average  Annual  Tax  Paymenis  and  Average 
Annual  Operating  Expenses  During  the  Period  1911-1920 

Percentage  of  operating  expenses  paid  in  total  State  and  local  taxes 
Telephone  and   Telegraph   Corporations  reporting  from  New  York  State 


class 


Operating  revenue  $1,000,000 
or  over 


B 

Operating    revenue  $100,000 
to  $999,999 


Operating    revenue     $25,000 
to  $99,999 


D 

Operating     revenue    $10,000 
to  $24,999 


E 
Operating  revenue  less  than 
10,000 


Total. 


Num- 
ber 
in 

classs 


Number  Paylno 


^  /o 

to 

2.9 


3% 

to 

3.9 


10 


29 


18 


66 


4% 

to 

4.9 


11 


22 


to 
5.9 


14 


6% 

to 

6.9 


to 
7.9 


8%    9% 


to 
8.9 


to 
9.9 


10% 

to 
10.9 


12% 

to 

12.9 


32% 

to 
32.9 


38% 

to 
38.9 


1 

1 


t     v*  : 


58 


59 


TABLE  42 
Relation  of  Total  State  Amy  Local  Taxes  to  Operating 
Expenses,   Electeic   Light   and  Power   Corporations  in 
New  York  State 

Frequency  Table  Based  upon  the  Average  Annual  Tax  Payments  wnd  Average 
Annual  Operating  Expenses  During  the  Period  1911-1920 

Percentage  of  operating  expenses  paid  in  total  State  and  local  taxes 

Electric  Light  and  Power  Corporations  in  New  York  State 


CLASS 


Num- 
ber 
in 

class 


Number  Paying 


A 

Operating  revenue  $1,000,000  or  over. . 

Operating  revenue  $100,000  to  $999,999 

Operating  revenue  $25,000  to  $99,999. . , 

Operating  revenue  less  than  $25,000 

Total 


8 
22 
15 

5 


than 

4% 


50 


4% 

to 

7.9 


1 
6 


8% 

to 

11.9 


11 


8 


25 


12% 

to 
15.9 


8 


20% 

to 
23.9 


^ 


32% 

to 
35.9 


84% 

to 
87.9 


TABLE  43 

Relation  of  Total  State  and  Local  Taxes  to  Operating 
Expenses,  Gas  and  Electric  Corporations  in  New  York 
State 

(Combining  gas  and  electric  service.) 

Frequency  Table  Based  upon  the  Average  Anntcal  Tax  Payments  and  Average 
Annual  Operating  Expenses  During  the  Period  1911-1920 

Percentage  of  operating  expenses  paid  in  total  State  and  local  taxes 

Oas  and  Electric  Corporations  reporting  from  New  York  State 


Num- 
ber 
in 
class 

Number  Paying 

class 

3% 

to 

3.9 

4% 

to 

4.9 

5% 

to 

5.9 

1 
1 

6% 

to 

6.9 

1 
2 

7% 

to 

7.9 

8% 

to 

8.9 

10% 

to 

10.9 

1 

2 
3 

11% 

to 

11.9 

13% 

to 
13.9 

18% 

to 

18.9 

A 
Operating  revenue  $1,000,000  or  over. 

B 

Operating  revenue  $100,000to  $999,999 

8 
14 

2 

2 

2 
2 

2 
2 

1 

1 

2 
3 

1 
1 

1 

•  •  • 

Total 

22 

2 

3 

4 

1 

1 

WF 


no 


61 


TABLE  44 
Rklatioi.  of  Total  State  axXd  Local  Ta^es  to  Operating 

Expenses,  Manufactured  Gas  Corporations  in  ^ew  York 
State 

Frequency  Table  Based  uvon  ihe  Average  Annual  Tax  Payments  and  iveraa. 
Annual  Operating  Expenses  During  the  Period  1911-19^     ^i^era^c 

Percentage  of  operatinj,-  expenses  paid  in  total  State  and  local  taxes 

Manufactured  Gas  Corporations  reporting  from  New  York  State 


class 


Num- 
ber 
in 
class 


Operating  revenue  $1,000,000 
or  over 

B 

Operating  revenue  S  100,000  to 
$999.999 


Operating  revenue  $25,000  to 
$99,999 


D 
Operating   revenue   less   than 
$25.000 


Total. 


18 


3% 

to 

3.9 


1 
2 


4% 

to 

4.9 


Number  Fating 


to 
5.9 


6% 

7% 

8% 

9% 

to 

to 

to 

to 

6.9 

7.9 

8.9 

9.9 

12% 

to 
12.9 


H         1|  1 


TABLE  45 

Relation  of  Total  State  and  Local  Taxes  to  Operating 

Expenses,  I^atural  Gas  Corporations  in  New  York  State 

Frequency  Table  Based  upon  the  Average  Annual  Taw  Payments  and  Average 
Annual  Operating  Expenses  During  the  Period  1911-1920 

Percentage  of  operating  expenses  paid  in  total  State  and  local  taxes 
Natural   Gas  Corporations  reporting  from  New  York  State 


CLASS 


Operating  revenue  $1,000,000 
or  over 


Operating  revenue  $100,000  to 
$999,999 


Num- 
ber 
in 
class 


Operating  revenue  $25,000  to 
$99,999 


D 

Operating   revenue  less    than 
$25,000 


Total, 


6 


18 


Less 
than 
2% 


Number  Patino 


2% 

to 

3.9 


4% 

to 

5.9 


6% 

to 

7.9 


10% 

to 

11.9 


12% 

to 
13.9 


14% 

to 
15.9 


16% 

to 

17.9 


02 


68 


TABLE  46 
Relation  of  Total  State  and  Local  Taxes  to  Opebating 
Expenses,  All  Gas  and  Electric  Companies  in  New  York 
State 

Frequency  Table  Based  upon  the  Average  Annual  Tax  Payments  and  Average 
Annual  Operatmg  Ea^enses  During  the  Period  1911-1920  ^ 

Percentage  of  operating  expenses  paid  in  total  State  and  local  taxes 
All  Gas  and  Electric  Companies  reporting  from  New  York  State 


class 


Operatmg  revenue  $1,000,000  or  over. . 

B 

Operating  revenue  $100,000  to  $999,999 

Operating  revenue  $25,000  to  $99,999. . 

D 

Operating  revenue  less  than  $25,000 

Total 


Num- 
ber 
in 

class 


NuMBEB  Paying 


20 
51 
27 
10 


Less 
than 

4% 


4% 

to 

7.9 


1        7 


108 


9 


15 


8% 

to 

11.9 


6 


12% 

to 

15.9 


25      11 


16 


54 


16% 

to 

19.9 


22 


11 


20% 

to 
23.9 


32% 

to 
35.9 


84% 

to 
87.9 


A  range  of  from  2  per  cent  to  85  per  cent  is  found  in  these 
ratios,  the  latter  being  a  quite  exceptional  case  in  the  electrical 
companies  group.  The  ratio  does  not  exceed  12  per  cent  for  the 
large  mass  of  utilities,  though  the  points  of  concentration  varv 
somewhat  for  the  different  classes  of  public  service  corporations. 
The  outstanding  fact  is  that  when  the  tax  burden  is  measured  by 
this  standard  a  wide  variation  is  again  found. 

The  following  table  presents  a  summary  of  the  situation  in  the 
different  classes,  the  median  case  in  each  group  being  picked  out 
as  typical. 


TABLE  47 
Average    Ratio    of    Total    State    and    Local    Taxes    to 

Operating  Expenses 

Public  Service  Corporations  in  New   York  State,   1911-1920 
The  average  employed  in  each  case  is  the  median;  thus  one-half  of  the  total 
number  of  corporations  included  in  each  of  the  given  groups  paid  more  than 
the  giv«n  percentage  of  their  operating  expenses  in  meeting  the  taxes  named, 
while  one-half  paid  less. 

Average    Ratio,    Total 
State      and      Local 
Taxes  to  Operating 
-T      ^  ^     ^  Expenses  (expressed 

nio<,»  ^4.  TT^-in*  Number    of    Corpora-  as  a  percentage  re- 

Class  of  Utility  tions  Included  lation) 

Electric    Railways    55  6  87 

Telephone  and  Telegraph 57  5*32 

Gas  and  Electric: 

Electric  Light  and  Power.  50  7.04 

Gas     and     Electric     (com- 
bined)   22  7.5 

Gas   (manufactured)    18  q  qq 

Gas    (natural) ig  g" 

Total  Gas  and  Electric 108  6  90 

The  variation  here  is  not  as  pronounced  as  in  certain  of  the 
other  ratios,  the  typical  case  being  5.32  per  c^nt  in  the  telephone 
group,  and  6.9  per  cent  in  the  gas  and  electric  group. 

Much  more  pronounced  is  the  variation  found  when  ratios  based 
on  aggregate  taxes  and  aggregate  operating  expenses  in  :N'ew  York 
are  computed.     These  ratios  are  presented  below: 

T'ABLE  48 
Ratio  of  Aggregate  State  and  Local  Taxes  to  Operatixg 

Expenses 

Public  Service  Corporations   in  New   York  State,   1911-1920 
The  ratio  for  each  class  is  the  percentage  relation  of  aggregate  State  and 
local  taxes  to  operating  expenses.     The  aggregate  figures  used  are  the  sums 
01  ten -year  averages  for  each  of  the  corporations  included.* 

Ratio     of     Aggregate 

State      and       Local 

Taxes  to  Operating 

•V'      ,,        n  ^  Expenses  (expressed 

Class   of    TItiHtv  Nninbor  of  Corp«.ra-  as  S  percentage  rela- 

Class   or    utility  tions  Included  tion)  e*- it-m 

Steam   Railroads    nn  '  r,   .^ 

Klectric    Railways    Sj  ,f!f 

Telephone  and  Telegraph.  ...  66  ft^» 

Gas  and  Electric:  ^'^^ 

Electric  Light  and  Power.  50  13  2 

Gas     and     Electric     (com- 

^bined)     22  10  4 

Gus    (manufactured)    18  02 

Gas    { natural )    ig  8  .5 

Total  Gas  and  Electric log""  n  qq 

*  For  the  basis  of  the  steam  railroad  figures,  cf,  supra,  p.  33. 


64 

For  steam  railroads  taxes  constitute  5.45  per  cent  of  total 
operating  expenses,  while  for  electric  railways  the  figure  is  11.58 
per  cent,  and  for  gas  and  electric  companies  11.  GO  per  cent. 
This  wide  variation  is,  of  course,  partially  due  to  different  operat- 
ing conditions. 

Relation  of  Total  Taxes  to  :N' et  Income. —  The  two  stand- 
ards used  above,  gross  earnings  and  o})erating  expenses,  are  useful 
for  certain  purposes,  but  obviously  do  not  constitute  a  measure 
of  tax-paying  ability.  They  are  not,  therefore,  adequate  as 
standards  by  which  tax  burden  may  be  measured.  jS^et  income 
is  the  best  single  standard  of  tax-paying  ability,  and  the  per- 
centage of  net  income  paid  in  taxes  is,  therefore,  the  figure  which 
best  measures  tax  burden.  This  ratio  has  been  determined  for 
the  different  classes  of  utilities,  and  the  results  are  presented  in 
the  tables  which  follow.  In  using  these  tables,  the  exact  meaning 
of  net  income  should  be  understood.  The  sense  in  which  that 
term  is  here  used  has  been  explained  above.* 

The  first  set  of  tables  show  the  relation  of  total  State  and  local 
taxes  to  net  income  for  the  corporations  included  in  the  study, 
the  distribution  by  classes  being  given. 


TABLE  49 

Relation  of  Total  State  and  Local  Taxes  to  Net  Income, 
Electric  Railways  in  New  York  State 

Frequency  Table  Based  upon  the  Average  Annual  Tax  Payments  and  the 
Average  Annual  Net  Income  Previous  to  any  Deduction  for  Taxes  Durina 
the  Period  1911-1920  ' 

1  —  Percentage  of  net  income  paid  in  total  State  and  local  taxes 
Electric  Railways  reporting  from  New  York  State 


Num- 
ber 
in 

class 

Number  Paying 

CLASS 

Less 
than 
50% 

50% 

to 
99.9 

100% 

to 
149.9 

150% 

to 
199.9 

200% 

to 
249.9 

250% 

to 
299.9 

3 

600% 

to 
649.9 

A 

Operating  revenue  $1,000,000  or  over. 

B 
Operating  revenue  $100,000  to  $999,999 

C 
Operating  revenue  less  than  $100,000. 

7 

19 

8 

4 

10 

4 

2 
4 

1 

1 

1 

2 
4 

.... 

.... 
.... 

1 

a     ■     •     •     • 

1 

Total 

34          IB 

7 

1 

3 

1 

•  Cf.  supra,  p.  11. 


65 


Supplementary  Table:      Detailed  Classification  of  Com- 
panies Paying  Less  than  50  Per  Cent 


45% 

to 
49% 


CLASS 


A   

B 

C 

Total 


Nunnber 

in 

class 

15% 

to 

19% 

20% 
to 

24% 

25% 

to 
29% 

30% 

to 
34% 

35% 
to 

39% 

40% 
to 

44% 

4 

10 

4 

.... 
1 

"i 

1 
1 

1 
2 

1 

1 
4 

.... 

18 

2 

1 

2 

4 

5 

•   •   .    • 

1 

2 

1 


TABLE  50 

Relation  of  Total  State  and  Local  Taxes  to  Net  Income, 
Telephone  and  Telegraph  Corporations,  New  York 
State 

Frequency  Table  Based  upon  the  Average  AnnuAil  Tax  Payments  and  the 
Average  Annual  Net  Income  Previous  to  any  Deduction  for  Taxes  Diwing 
the  Period  1911-1920 

Percentage  of  net  income  paid  in  total  State  and  local  taxes 
Telephone  and  Telegraph  Corporations  reporting  from  New  York  State 


Num- 

Number Paying 

CLASS 

ber 

in 

class 

Less 
than 
10% 

10% 

to 

19.9 

20% 

to 
29.9 

30% 

to 
39.9 

40% 

to 
49.9 

50% 

to 
59.9 

60% 

to 
69.9 

70% 

to 
79.9 

130% 

to 
139.9 

A 

Operating  revenue  $1,- 

000,000  or  over 

B 

Operating           revenue 

$100,000  to  $999,999. 

C 

Operating  revenue  $25,- 

000  to  $99,999 

D 
Operating  revenue  $10,- 
000  to  $24,999 

e 

Operating  revenue  less 
than  $10,000 

2 

7 

10 
27 
16 

1 

2 

1 

2 
4 
9 
6 

1 
3 
4 
9 
2 

1 

1 

1 
3 
3 

1 
1 

o 
3 

1 

1 

Total 

62 

4 

21 

19 

2 

7 

2 

5 

1 

1 

66 


TABLE  51 
Relation  of  Total  State  and  Local  Taxes  to  :N'et  Income, 
Electric   Light  and  Power  Corporations  in  New  York 
State 

ZTerio/iSliwL  '     '"'"""*  *"  ""*  Deduction  for  Taxes  During 

Percentage  of  net  income  paid  in  total  State  and  local  taxes 
EUctr^e  Ught  and  Power  Corporation  reporting  from  New  York  State 


Num- 
ber 
in 
class 

Number  Paying 

CLASS 

Less 
than 
10% 

10% 

to 
19.9 

2 

20% 

to 
29.9 

30% 

to 
39.9 

40% 

to 
49.9 

50% 

to 
59.9 

1 

60% 

to 
69.9 

1 

70% 

to 
79.9 

300% 

to 
309.9 

Operating  revenue  $1,000,000  or  over. 

8 

4 

Operating  revenue  $100,000  to  $999,999. . 

21 

1 

9 

8 

1 

1 

1 

c 

Opera tmg  revenue  $25,000  to  $99,999. 

13 

,   , 

6 

3 

2 

1 

1 

Operating  revenue  less  than  $25,000 

Total 

3 

1 

2 

1 

3 

2 

1 

45 

19 

15 

3 

1 

TABLE  52 
Relation  of  State  and  Local  Taxes  to  JS^et  Income,  Gas  and 
Electric  Corporations  in  :N'ew  York  State 
(Combining  gas  and  electric  service.) 

Freqi^ncy   Table   Based   upon   the  Average  Annual   Tax  Payments  and   the 

Percentage  of  net  income  paid  in  total  State  and  local  taxes 
Gas  and  Electric  Corporations  reporting  from  New  York  State 


CLASS 


Num- 
ber 
in 

class 


Operating  revenue  $1 ,000,000 


or  over . 


B 


Operating  revenue  $100,000  to  $999,999 
Total 


12 


19 


Number  Paying 


5% 

to 

9.9 


10% 

to 
14.9 


15% 

to 

19.9 


20% 

to 
24.9 


3 
5 


25% 

to 
29.9 


30% 

to 
34.9 


35% 

to 
39.9 


45% 

to 
49.9 


60% 

to 
64.9 


85% 

to 

89.9 


67 


TABLE  53 
Relation  of  State  and  Local  Taxes  to  ]^et  Income,  MA^u- 

FACTURED  Gas  COMPANIES  IN  !^^^EW  YoRK  StATE 

Frequency  Table  Based  upon  the  Average  Aimual  Tax  Payments  and  the 
Average  Annual  Net  Income  Previous  to  any  Deduction  for  Taxes  During 
the  Period  1911-1020 

Percentage  of  net  income  paid  in  total  State  and  local  taxes 
Manufactured  Gas  Companies  reporting  from  New  York  State 


Num- 
ber 
in 
class 

Number  Paying 

CLASS 

20% 

to 

29.9 

1 

3 

1 

30% 

to 
39.9 

50% 

to 
59.9 

70% 

to 
79.9 

1 

1 

80% 

to 
89.9 

90% 

to 
99.9 

100% 

to 
109.9 

120% 

to 
129.9 

140% 

to 
149.9 

A 
Operating  revenue  $1,000,000  or  over 

B 
Operating  revenue  $100,000  to  $999,- 
999 

2 

8 
5 

2 

1 

1 
1 

1 

1 

1 
1 

1 

•   •    •    • 

1 

•    •    •  • 

1 

C 
Operating  revenue  $25,000  to  $99,999 

Total 

15 

1 

1 

1 

- 

TABLE  54 

Relation  of  Total  State  and  Local  Taxes  to  Net  Income, 
Natural  Gas  Companies  in  New  York  State 

Frequency    Table    Based   upon   the   Average   Annual    Tax   Payments   and    the 
Average  Annual  Net  Income  Previous  to  any  Deduction  for  Taxes  During 
the  Period  1911-1920 

Percentage  of  net  income  paid  in  total  State  and  local  taxes 
Natural  Gas  Companies  reporting  from  New  York  State 


Num- 
ber 
in 
class 

Number  Paying 

class 

Less 

than 

5% 

10% 

to 

14.9 

3 
2 

5 

15% 

to 

19.9 

1 
1 

1 

3 

20%  25% 

to      to 
24.9  29.9 

1 

1 
1 

30%  45% 

to      to 
34.949.9 

65% 

to 
69.9 

70% 

to 
74.9 

140% 

to 
144.9 

A 
Operating    revenue  $1,000,000  or 
over 

2 
6 
7 
3 

1 

1 

1 
1 

1 
1 

1 
1 

1 
1 

B 

Operating    revenue    $100,000    to 
$999,999 

C 

Operating     revenue     $25,000     to 
$99,999 

1 

Operating  revenue  less  than  $25,- 
000 

•   •   •   •  s 

Total 

18 

2 

1 

2 

1 

68 


T'ABLE  55 

Relation  of  Total  State  and  Local  Tax  to  Net  Income,  All 

Gas  and  Electric  Companies  in  New  York  State 

"^''^''^Zo^'S^J^'kLT''    ^'7,*^--^^   -^-'-^    Ta.   Payments  and   the 
trJp!ri;"m^^^^  '"'•*""*  ^"  ^^y  deduction  for  Ta.es  During 

Percentage  of  net  income  paid  in  total  State  and  local  taxes 
All  Gas  and  Electric  Companies  reporting  from  Xew  York  State 


€LASS 


Operating  revenue 
$1,000,000  or  over 

B 

Operating  revenue 
»1 00,000  to  i999,- 
999 

C 

Operating  revenue 
125,000  to  *99.999. 

D 

Operating  revenue 
less  than  $25,000. . 

Total 


Num- 
ber 
in 

class 


Number  Patino 


te  i^r^^^r^^?^"!'*^^^  50%  60%  70%  80%  W  100% 
than  I  to      to   !  to      to      to      to      to      to  i  to       in 

10%  ,19.9,29.9,39.9  49.9  59  9  66  9  79  9  sJ  9  99  9  109  9 


19 


47 


25 


97 


14 


120% 

to 
129.9 


H0% 

to 
149.9 


17 


5       3 


1        1 


2        1 


4  I  29  I  32  I  10 


300% 

to 
309.9 


1  1 


The  variation  within  each  group  is  pronounced.  From  less 
than  2  per  cent  the  ratio  extends  to  more  than  600  per  cent. 
When  the  ratio  is  in  excess  of  100  per  cent  it.  means  that  a  com- 
pany which  showed  a  profit  before  taxes  were  paid  had  a  deficit 
after  paving  taxes. 

The  frequency  tables  above  present  the  details  of  the  situation 
within  each  group.  In  the  following  table  the  median  case  has 
been  picked  out  as  representative  of  each  class.  The  ratios  there 
given  are  to  be  considered  typical  in  that  the  burden  of  taxes  on 
an  average  company  is  shown  for  each  group.  In  determining 
these  ratios  all  companies,  whether  operating  at  a  profit  or  a  loss, 
have  boon  included. 


69 


TABLE  56 

Average  ILvtio  of   Total  State  and   Local   Taxes  to   Xet 

Income 

Public   Hcrrice   ^Corporations   in   New   York   State,    1011-1920 
The  average  employed  in  each  case  is  the  median ;  thus  one-half  of  the  total 
number  of  corporations  included  in  each  of  the  given  groups  paid  more  than 
the  given  percentage  of  their  net  income  in  meeting  the  taxes  named,  while 
one-half  paid  less. 

Average    Ratio.    State 

and  Local  Taxes  to 

Xet      Income       (ex- 

Xnniher     of     Cnrpoia-  press^nl     as     a     per- 

i  lass  of  T  tility  tions    In<;lu(le<l  ••outage   relation) 

Electric    Railways    56  1S7.5 

Telephone  and  Telegraph....  67  23.61 

Gas  and  Electric: 

Electric  Light  and   Power.  .10  23.33 

Oas     and     Electric      (com- 
bined )     22  28.75 

Gas    (manufactured) 18  65.00 

Gas    (natural) 18  18.33 

Total  Gas  and  Electric 108  26.56 

The  typical  case  in  the  electric  railway  group  is  in  a  position 
distinctly  less  favorable  than  the  typical  companies  in  the  other 
groups.  The  fact  that  a  relatively  large  percentage  of  the  electric 
railways  operate  at  a  loss  accounts  for  the  high  ratio  here  shown. 

The  following  table  presents  the  situation  when  only  companies 
operating  at  a  profit  are  included. 

TABLE  57 
Average  Ratio  of  Total  State  and  Local  Taxes  to  Xet 

Income 

Public  Service  Corporal  ions  Opcratinfj  at   a   Profit.   1911-1920 
(Excluding   corporations    showing    a    deficit) 

Average    Ratio.    Total 
^,  -  ,.  .,.  State       and       Local 

Class  of  I  tility  Xuniber     of     Corpora-  Taxes  to  Xet  Income 

tions   Included  (expressed       as       a 

percentage   relation* 
Electric    Railways    34  48.75 

Telephone  and  Telegraph ....  '  63  22 . 8 

Gas  and  Electric: 

Electric  Light  and  Power.  45  22.67 

Gas     and     Electric      (com- 
bined)       19  •  26.87 

Gas    (manufactured) 15  38.33 

Gas    (natural) 18  18.33 

Total  Gas  and  Electric 97  24.85 


70 


71 


The  iy  pic'dl  electric  railway  in  this  group  pays  48.75  per  cent 
of  its  net  income  from  Xew  York  business  in  meeting  all  its 
State  and  local  taxes.  The  two  other  classes  of  utilities  here 
shown  are  represented  by  companies  paying  24.85  per  cent  in  the 
case  of  gas  and  electric  companies,  and  22.8  per  cent  in  the  case  of 
telephone  and  telegraph  companies. 

While  the  above  figures  show  the  condition  of  typical  companies 
they  do  not  show  the  relation  between  the  total  taxes  paid  by  dif- 
ferent classes  of  utilities  and  the  total  net  income,  from' New 
York  business,  of  each  of  the  utility  groups. 

It  is  desirable  to  establish  such  relations,  for  the  fiscal  aspects 
of  the  problem  are  most  clearly  brought  out  by  the  aggregate 
figures.     These  rates  are  shown  in  the  following  tables: 

TABLE  58 

Ratio  of  Aggregate  State  axd  Local  Taxes  to  Aggregate 

Net  Income 
Public   Serf  ice   Corporations   in  .Yew   York   State,    1911-1920 
The  ratio  for  eaeli  class  is  the  percentage  relation  of  aggregate  State  and 
local  taxes  to  aggregate  net  income.     The  aggregate  figures  used  are  the  sums 
of  ten-year  averages  for  each  <.f  the  corporations  inchitlecl.* 


r,i  #  T'^-i-^  Xuniher     of     Corpora- 

Class  of  I  tility  tions   Included 

Steam    Railroads  t     joj) 

Electric    Railways    5(5 

Telephone    and    Telegraph ...  66 
Gas  and  Electric- 
Electric  Light  and  power.  .                  50 
Cas     and     Electric      (com- 
bined)                   22 

Gas    (manufactured)    18 

Gas    (natural)     ig 

Total  Gas  and  Electric 108 


Ratio  of  Aggregiite 
State  and  Local 
Taxes  to  Aggregate 
Net  Income  (ex- 
pressed as  a  per- 
centage   relation) 

28.2 
56.5 
16.2 

23.9 

32.9 
27.7 
11.8 


24.1 


The  ratios  here  given  are  in  general  lower  than  in  the  median 
ta])les,  because  of  the  preponderant  influence  of  the  laro-e  com- 
panies,  which  are  on  the  whole  more  profitable.      Electric   rail 

*  For  the  basis  of  tlie  steam  railroad  figures,  of.  nunra,  p    .^•5 
ar^  inXled 'r\a'\Vr.T7:""'*^^*''    "''    ""^"''^^''     ^'*^^"    ''^''^''^^    ^««'1«    0"!^ 


ways  are  still  seen  in  a  position  of  less  advantage,  while  telephone 
and  telegraph  companies  show  the  lowest  percentage. 

The  changes  resulting  from  the  omission  of  companies  report- 
ing losses  are  not  pronounced.  The  following  table  gives  the 
ratios  based  upon  the  returns  of  the  profitable  corporations  only. 


TABLE  59 

Katk)  of  Aggregate  State  and  Local  Taxes  to  Aggregate 

Net  Income 

Public  Service  Corporations  Operating  at  a  Profit 

(Excluding   corporations   showing   a   deficit) 

Ratio     of     Aggregate 

State      and      Local 

Taxes  to  Aggregate 

Net      Income      (ex- 

Nnmber     of     Corpora-  pressed     as     a    per- 

Class  of  Utility  tions    Included  centage   relation) 

Steam    Railroads  *     87  27 . 3 

Electric    Railways    34 

Telephone   and    Telegraph  t .  .  02 

Gas  and  Electric: 

Electric  Light  and  Power . .  45 

Gas     and     Electric      (com- 
bined)       19 

Gas    (manufactured)    15 

Gas    (natural)     IS 

Total  Gas  and  Electric 97 


44.40 

k 

16.2 

23.7 

28.1 

28.0 

11.8 

23.0 

Relation  of  State  Taxes  to  Xet  Income. —  The  preceding 
section  dealt  with  the  relation  of  total  taxes  to  net  income.  It  is 
desirable  to  ])resent  an  additional  comparison  in  w^hich  all  local 
taxes  are  excluded  and  only  the  taxes  paid  directly  to  the  State 
are  included.  The  following  frequency  tables  show  the  j>ercent- 
age  of  net  income  paid  in  State  taxes  by  the  corporations  included 
in  each  of  the  public  utility  groups. 

•  This  ratio  is  31.2  when  operating  roads  only  are  inolnded. 

t  The  returns  from  one  large  telephone  and  telegraph  company,  which  is  primarily 
a  holding  company,  affect  the  telephone  ratio  materially.  When  taxes  and  income 
of  this  company  are  omitted,  the  ratio  of  aggregate  taxes  to  aggregate  net  income, 
for  all  other  companies,  becomes  21.8  per  cent.  Income,  as  used  in  establishing 
this  ratio,  includes  non-operating  as  well  as  operating  income. 


iy 


m^ 


72 


73 


TABLE  60 

Relation  of  Total  State  Taxes  to  I^et  Income,  Electkic 

Railways  in  New  York  State 

^'*T;fJ''lJX?'  fia..rf  ,,pon  the  Average  Annual  State  Tax  Payments  and 
the  Average  Annual  Ae^  Income  Previous  to  any  Deduction  for  Tax^s 
During  the  Period  1911-1920  «*'*t^"un^  jor   laxes 

Percentage  of  net  income  paid  in  total  State  taxes 
Electric  Railways  reporting  from  New  York  State 


Num- 
ber 

Number  Paying 

CLASS 

in 
class 

Less 
than 
9% 

9% 

to 

17.9 

18% 

to 

26.9 

27% 

to 
35.9 

54% 

to 
62.9 

81% 

to 
89.9 

315% 

to 

322 

^                              A 

Operating  revenue  $1,000,000  or  over. 

7 

6 

1 

B 

Operating  revenue  $100,000  to  $999,999 

19 

10 

5 

2 

1 

1 

C 
Operating  revenue  less  than  $100,000 . 

8 

4 

1 

2 

1 

•    •    •    • 

.lotal 

34 

20 

6 

1 

2 

3 

1 

1 

Supplementaby  Table:      Detailed   Classification  of   Com- 
panies Paying  Less  than  18  Pee  Cent 


CLASS 


A 

B 

C 

Total 


Number 

in 

class 


7 

15 

4 


Less 
than 

2% 


2% 

to 

3.9 


4% 

to 

5.9 


26 


3 
1 
2 


6% 

to 

7.9 


8% 

to 

8.9 


to 
11.9 


6 


5 
1 


6 


4 
1 


2 
2 


12% 

to 
13.9 


TABLE  61 

Relation  of  Total  State  Taxes  to  !N^et  Income,  Telephone 
AND  Telegraph  Corporations  in  'New  York  State 

Frequency  Table, Based  upon  the  Average  Annual  State  Tax  Payments  and 
the  Average  Annual  Net  Income  Previous  to  any  Deduction  for  Taxes 
During  the  Period  1911-1920 

Percentage  of  net  income  paid  in  total  State  taxes 

Telephone  and  Telegraph  Corporations  reporting  from  New  York  State 


Num- 
ber 
in 
class 

Number  Paying 

CLASS 

Less 
than 

1% 

1% 

to 

1.9 

1 

1 
2 

2% 

to 

2.9 

1 
3 
3 
4 

3% 

to 

3.9 

1 

2 

3 

8 
2 

4% 

to 

4.9 

1 

2 

7 

2 
12 

5% 

to 

5.9 

2 

2 

2 
6 

6% 

to 

6.9 

1 

1 

7% 

to 

7.9 

1 
2 

8% 

to 

8.9 

1 
2 

3 

9% 

to 

9.9 

1 
1 

11% 

to 

11.9 

1 

1 

15% 

to 

15.9 

1 
1 

16% 

to 
16.9 

A 

Operating  revenue 
$1,000,000  or  over. 
R 

Operating  revenue 
$100,000  to  $999,- 
999 

2 

7 
10 
27 
16 

1 
1 
1 

C 

Operating       revenue 

$25,000  to  $99,999 

D 

Operating      revenue 

$10,000  to  $24,999 

E 

Operating       revenue 

less  than  $10,000. . 

•  • 

1 

•  .   . 

Total 

62 

3 

11 

16 

2  '     -1 

1 

^     - 


74 


TABLE  62 

Relation  of  Total  State  Taxes  to  Net  Income,  Electric 
Light  and  Power  Corporations  in  I^ew  York  State 

Frequency  Table  Ba^ed  upon  the  Average  Annual  State   Ta^  Payments  and 

Percentage  of  net  income  paid  in  total  State  taxes 
ElectHc  Light  and  Power  Corporaticms  reporting  from  New  York  State 


Num- 
ber 
in 

class 

Number  Patino 

CLASS 

Less 
than 

1% 

1% 

to 

1.9 

2% 

to 

2.9 

3% 

to 

3.9 

4% 

to 

4.9 

2 

5% 

to 

5.9 

6% 

to 

6.9 

7% 

to 

7.9 

38% 

to 
38.9 

Operating  revenue  $1,000,000  or  over. . .  . 

8 

1 

2 

3 

•  «  • 

B 
Operating  revenue  $100,000  to  $999,999. . 

21 

•    >   .    . 

5 

6 

3 

4 

1 

2 

•   •   • 

Operating  revenue  $25,000  to  $99,999. 

13 

.... 

1 

2 

3 

3 

3 

1 

D 

Operating  revenue  less  than  $25,000 

3 

.... 

2 

1 

•   . 

9 

•   • 

3 

1 

~ 

Total 

j."^ 

1 

t  r\ 

*«>                  1          IV 

12         6 

1 

75 


TABLE  63 

Relation  of  Total  State  Taxes  to  Xet  Income,  Gas  and 

Electric  Corporations  in  New  York  State 

(Combining  gas  and  electric  service.) 

Frequency  Table  Hased  upon  the  Average  Annual  State  Tax  Payments  and 
the  Average  Annual  Xet  Income  Previous  to  any  Deduction  for  Tawes 
During  the  Period  1911-1920 

Percentage  of  net  income  paid  in  total  State  and  local  taxes 

Gas  and  Electric  Corporations  reporting  from  New  York  State 


Number 

in 

class 

Number  Payixg 

CLASS 

2% 

to 

2.9 

3% 

to 

3.9 

4% 

to 

4.9 

o 
1 

5% 

to 

5.0 

7% 

to 

7.9 

9% 

to 

9.9 

A 
Operating  revenue  $1,000  000 
or  over 

7 
12 

3 

1 

2 

7 

2 

B 

Operating    revenue    $100,000 
to  $999,999 

1 

Total 

19 

4 

9                -•? 

2 

1 

TABLE  64 

Relation  of  Total  State  Taxes  to  !N^et  Income,  Manufac- 
tured Gas  Companies  in  J^ew  York  State 

Frequency  Table  Baaed  upon  the  Average  Annual  State  Tax  Payments  and 
the  Average  Annual  Xet  Income  Previous  to  any  Deduction  for  Taxes 
During  the  Period  1911-1920 

Percentage  of  net  iiuome  ])aid  in  total  Slate  taxes 

Manufactured  Gas  Corporations  reporting  from  Xew  York   State 


Num- 
ber 

in 
class 

2 

8 

5 
15 

NUMBEH 

Paying 

CL.VSS 

1% 
to 
1.9 

1 
1 

2% 

to 
2.0 

1 

1 

«'.  0 

to 
3.9 

1 
1 

2 

4% 

to 

4.9 

2 

2 

4 

5% 

to 

5.9 

1 

1 
2 

6% 

to 

6.9 

8% 

to 

8.9 

9% 
to 

9.9 

1 

1 

13% 

to 
13.9 

14% 

to 
14.9 

A 

Operating  revenue  $1,000,000  or  over. 

B 

Operating  revenue  $100,000  to  $999,- 
999 

1 

1 

1 
1 

1 
1 

•   •    ■ 

1 

.   •    • 

1 

C 

Operating  revenue  $25,000  to  $99,999 . 

Total 

76 


77 


TABLE  65 

.Relation  of  Total  State  Taxes  to  :N'et  Income,  IN'atural 
Gas  Companies  in  ^N'ew  York  State 

Frequency  Table  Based  upon  the  Average  Annual  State  Tax  Payments  and 
the  Average  Annual  Net  Income  Previous  to  any  Deduction  for  Taxes 
During  the  Period  1911-1920 

Percentage  of  net  income  paid  in  total  State  taxe.s 
Natural  Gas  Companies  reporting  from  New  York  State 


Num- 
ber 
in 

class 

Number  Paying 

CLASS 

Less 

than 

0.5% 

.5% 
to 
!    .9 

1% 
to 
1.4 

15% 
to 
1.9 

2% 

to 

2.4 

2.5% 

to 

2.9 

3% 

to 

3.4 

1 
1 

4% 

to 

4.4 

1 

1 

5.5% 

to 

5.9 

7% 

to 

7.4 

1 
1 

8% 

to 

8.4 

•   • 

1 
1 

8.5% 

to 

8.9 

A 
Operating  revenue  $1  ,- 
000,000  or  over. . . . 

B 
Operating        revenue 
$100,000  to  $999,999 

C 

Operating        revenue 
$25,000  to  $99,999 

D 
Operating       revenue 
less  than  $25,000 .  . 

2 
6 
7 
3 

1 

1 
1 

•   • 

2 

1 
3 

2 

1 

1 
1 

2 

1 

•    •    • 

2 

1 

TotiJ 

18 

1 

3 

1 

2 

1 

TABLE  6Q 

Relation  of  Total  State  Taxes  to  Net  Income.  All  Gas 
AND  Electric  Companies  in  New  York  State 

Frequency  Table  Based  upon  the  Average  Annual  State  Tax  Payments  and 
the  Average  Annual  Net  Income  Previous  to  any  Deduction  for  Taxes 
During  the  Period  1911-1920 

Percentage  of  net  income  paid  in  total  State  taxes 
All  Oas  and  Electric  Companies  reporting  from  New  York  State 


■ 

Num- 
ber 
in 
class 

NuHBER  Fating 

class 

Less 

than 

1% 

1% 

to 

1.9 

2% 

to 

2.9 

3% 

to 

3.9 

4% 

to 

4.9 

5% 
to 
5.9 

6% 

to 

6.9 

7% 

to 

7.9 

8% 

to 

8.9 

9% 
to 
9.9 

13% 

to 

13.9 

14% 

to 

14.9 

38% 

to 

38.9 

a 

Operating    revenue  $1,000,000  or 
over 

19 

47 

25 

6 

2 

1 

2 

9 

3 

3 
17 

7 

9 

3 

1 
20 

3 

11 

4 

18 

4 

7 
6 

17 

1 

4 
2 

2 

4 
1 

1 
2 

1 

1 

1 

1 
1 

B 
Operating    revenue    $10O,06o    to 
$999,999 

C 

operating  revenue  $25,000  to  $99,- 
999 

D 
Operating  revenue  leas  than  $25,000 

•  •  • 

1 

•  •  * 

ToUl 

97 

3 

7 

2 

5 

3 

2 

1 

1 

The  varying  burden  of  these  State  taxes  is  revealed  by  the 
frequency  tables.  It  is  clear  that  these  taxes,  levied  upon  gross 
earnings,  capital  stock,  or  excess  dividends,  fall  with  very  unequal 
weight  upon  different  corporations  when  expressed  in  terms  of 
net  income. 

The  comparison  of  the  tax  burden  on  the  different  groups  is 
facilitated  by  the  selection  of  typical  cases  for  each  class.  The 
results  are  given  below,  the  ratio  of  State  taxes  to  net  income 
for  the  median  case  being  shown  for  each  group. 


m 


.6 


79 


TABLE  67 

AVEKAGE    ILVTIO    OF    ToTAL    StATE    T.iXES    TO    Xet    IjNCOME 

Public   Service   Corporations    in    'S'ew   York   Slate,    1911-1920 
The   average  employed  in  each  case   is  the  median;    thus   one-half   of  the 
total    number    oi    corporations    included    in    each    of    the   given    crroups    paid 
more   than  tlie  given   percentage   of   their  net   income   in   meeting  the   taxes 
named,  while  one-half  paid  less. 


/-!„        f  TT*.,-*  Number     of     Corpora- 

Class  of  Utility  tions    lucluded 

Electric   Railways    ^ 

Telephone  and  Telegraph  ....  Q^ 

Gas  and  Electric: 

Electric  Light  and  Power . .  50 

Gas      and    Electric     (com- 
bined )      22 

Gas   (manufactured)    18 

Gas  (natural)    18- 

Total  Gas  and  Electric 108 


Average  Ratio,  Total 
State  Taxes  to  Net 
Income  (expressed 
as  a  percenrage  re- 
lation) 


\ 

31.50 
3.94 

3.33 

3.78 
5.50 
2.25 

3.78 


For  two  of  the  main  groups  the  ratios  are  not  far  apart.  The 
typical  telephone  company  (i.  e.  the  median  company)  pays  3.94 
per  cent  of  its  net  income  in  meeting  State  taxes,  and  the  tyjncal 
gas  and  electric  company  3.78  per  cent.  Electric  railways  show 
an  average  very  much  gieater,  the  typical  ratio  being  33  per 
cent. 

When  profitable  companies  alone  are  included,  and  the  median 
ratios  selected,  the  following  values  are  secured. 


1 


TABLE  68 
AvEKAGE  Ratio  of  Total  State  Taxes  to  ^N'et  Income 

Public  Service  Corporations  Operating  at  a  Profit,  1911-1920 
(Excluding  corporations  showing  a  deficit) 


Number     of     Corpora- 
Class  of  Utility  tions   Included 

Electric   Railways    34 

Telephone  and  Telegraph.  ...  62 

Gas  and  Electric: 

Electric  Light  and  Power . .  45 

Gas     and     Electric     (com- 
bined )    19 

Gas   (manufactured)    ...  15 

Gas  ( natural )    18 

Total  Gas  and  Electric 97 


Average  Ratio,  Total 
State  Taxes  to  Net 
Income  (expressed 
as  a  percentage  re- 
lation ) 

8.40 
3.87 

2.96 

3.56 
4.75 
2.25 


3.47 


The  electric  railway  ratio  is  materially  smaller,  being  only 
8.4  per  cent,  w^hile  the  figures  for  the  other  groups  are  somewhat 
lower. 

In  the  two  preceding  tables  the  different  groups  have  been 
represented  by  typical  cases,  equal  weight  being  given  to  large 
and  small  companies  in  the  selection  of  the  median  cases.  The 
following  table  shows  the  relations  between  aggregate  State  taxes 
and  aggregate  net  income  from  l^ew  York  business  for  each  of 
the  utility  groups. 

Note  :    The    term    "  State    taxes "    as    here    used    includes    capital    stock    taxes, 
taxes  on  ^ross  earnings,  and  taxes  on  excess  diWdends. 


80 

TABLE  69 

Ratio  of  Ao(iBEGATE  State  Taxes  to  Aggregate  JSTet  Income 

Public  Service   Corporations  in  New   York  State,   1911-1920 

The  ratio  for  each  class  is  the  percentage  relation  of  aggregate  State  taxes 

i^Jr^^^'^^f  ^  "    i,'"??u  •    ^^^  ^regate  figures  used  are  the  sums  of  ten-year 
averages  for  each  of  the  corporations  included.  ^ 

Ratio     of     Aggregate 

State  Taxes  to  Ag- 

vj  „,u  *     ^  gregate  Net  Income 

Class  of  T'fiiitv  Number     of    Corpora-  (expressed  as  a  per- 

SteamXifroVds^*' '^^°^   '"^^"^^  109  ''"'^"^  '''''''''V  74 

Electric   Railways    55  0*00 

Telephone  and  Telegraph . .  66  a'\K 

Gas  and  Electric: 

Electric  Light  and  Power. .  60  2.8 

Gas     and     Electric     (com- 
bined)      22  3.9 

Gas   (manufactured)    18  42 

Gas  (natural)    ig  1.5 

Total  Gas  and  Electric 108  2  90 

Steam  railroads,  it  is  seen,  pay  2.74  per  cent  of  their  net 
income  from  New  York  business  in  meeting  State  taxes,  while 
electric  railways  pay  8.28  per  cent.  The  ratios  for  the  other 
classes  lie  between  these  limits. 

When  ratios  are  determined  for  the  companies  operating  at  a 
profit  the  following  results  are  secured. 

TABLE  70 
Ratio  of  Aggregate  State  Taxes  to  Aggregate  Net  Income 

Public  Service  Corporations  Operating  at  a  Profit,  1911-1920 
(Excluding  corporations  showing  a  deficit) 
The  ratio  for  each  class  is  the  percentage  relation  of  aggregate  State  taxes 
to  aggregate  net  income.    The  aggregate  figures  used  are  the  sums  of  ten-year 
average  for  each  of  the  corporations  included f 

Ratio     of      Aggregate 
State   Taxes   to  Ag- 
gregate Net  Income 
r^i  *  T-i.«^  Number     of    Corpora-  (expressed  as  a  per- 

Ciass  or  Ltility  tions   Included  centage   relation) 

Steam  Railroads! gj  2.05 

Electric    Railways 34  6 .  55 

Telephone  and  Telegraph!. . .  62  4*10 

Gas  and  Electric: 
Electric  Light  and  Power . .  45  2.7 

Gas     and     Electric     (com-  * 

bined)    19  3.5 

Gas   (manufactured)    15  4.1 

Gas  (natural)    18  1.5 

Total  Gas  and  Electric 97  2 .  80 

*  For  operating  roads  only  the  ratio  is  3.08. 
t  For  the  basis  of  the  steam  railroad  figures,  of.  supra,  p.  33. 
t  For  operating  roads  only  the  ratio  is  3.04. 

?  This  ratio  becomes  3.2  per  cent  when  returns  from  one  large  company,  primarily 
a  holding  company,  are  excluded. 


<> 


81 


Relation  Between  Local  Taxes  and  Net  Income. —  Taxes 
paid  to  localities  on  real  and  personal  property  and  on  special  fran- 
chises constitute  the  chief  tax  payments  made  by  public  service  cor- 
porations, in  so  far  as  Xew  York  taxes  are  concerned.  Though 
property  taxes  are  not  in  general  so  burdensome  as  income  or 
capital  stock  taxes,  it  is  desirable  to  determine  the  relative  im- 
portance of  these  local  taxes.  The  following  frequency  tables 
show  the  percentage  of  net  income  paid  in  local  taxes  by  the 
various  types  of  public  service  corporations,  and  indicate  the  ex- 
tent to  which  the  burden  of  these  taxes  varies  within  each  of  the 
groups. 

TABLE  71 

Relation  of  Total  Local  Taxes  to  Xet  Income,  Electric 

Railways  in  ^ew  York  State 

Frequency  Table  liased  upon  the  Average  Annual  Local  Tax  Payments  and 
the  Average  Annual  Ket  Income  Previous  to  any  Deduction  for  Taxes 
During  the  Period  1911-1920 

Percentage  of  net  income  paid  in  total  local  taxes 

Electric  Railways  reporting  from  New  York  State 


CLASS 


A 
Operating    revenue    $1,000,000    or 

over 

B 
Operating     revenue     $100,000     to 

$999,999 

C 
Operating  revenue  less  than  $100,- 
000 

Total 


Num 
ber 
in 
class 


19 

8 
34 


Number  Paying 


Less 
than 
25% 


3 

7 


25% 

to 
49.9 


11 
2 


16 


50% 

to 
74.9 


75% 

to 
99.9 


100%: 

to 
124.9 


1 
2 


to 
174.9 


175% 

to 
199.9 


200% 

to 
224.9 


325% 

to 
349.8 


Supplementary  Table:     Detailed  Classification  of  Com- 
panies Paying  from  25  to  50  Per  Cent 


CLASS 

Number 

in 

class 

25% 

to 
29.9 

30% 

to 
34.9 

35% 

to 
39.9 

40% 

to 
44.9 

45% 

to 
49.9 

A 

3 

11 

2 

1 
4 

2 
4 

2 

B 

2 

I 

C 

Total 

16 

5 

6 

2 

2 

^ 


•4        ^ 


S'5 


Hi 


82 


TABLE  72 

Relation  of  Total  Local  Taxes  to  Xet  Income,  Telephone 
AND  Telegraph  Corporations  in  ^ew  York  State 

Frequency  Table  Based  upon  the  Average  Annual  Local  Tax  Payments  and 
the  Average  Annual  Net  Income  Previous  to  any  Deduction  for  Taxes 
During  the  Period  1911-1920 

Percentage  of  net  income  paid  in  total  local  taxes 

Telephone  and  Telegraph  Corporations  reporting  from  New  York  State 


Num- 
ber 
in 

class 

2 

7 
10 

27 
16 

Number  Paying 

CLASS 

Less 
than 

5% 

5% 

to 

9.9 

10% 

to 
14.9 

4 

6 
3 

15% 

to 
19.9 

1 

1 
2 

9 
3 

20% 

to 
24.9 

3 

1 

2 

25% 

to 
29.9 

1 

1 

1 

30% 

to 
34.9 

35% 

to 
39.9 

40% 

to 
44.9 

•   • 

2 

1 
3 

45% 

to 
49.9 

1 

1 

1 
3 

55% 

to 
59.9 

1 
2 

65% 

to 
69.9 

•  • 

1 

•  • 

•  • 

115% 

to 
119.9 

A 

Operating  revenue 
SI. 000.000       or 

over 

B 

Operating  revenue 
SIOO.OOO           to 

$999,999 

C 

Operating  revenue 
$25,000  to  $99,. 
999 

1 
2 

1 
3 

1 

•   • 

1 

•   • 

2 

3 
5 

•  •   •  • 

1 

D 

Operating  revenue 
$10,000  to  $24,- 

999 

E 

Operating  revenue 
less  than  $10,000 

Total 

62 

3 

4 

13 

16 

6 

3 

3 

1 

1 

83 

TABLE  73 

Relation  of  Total  Local  Taxes  to  Net  Income,  Electric 
Light  and  Power  Corporations  in  Xew  York  State 

Frer/uency  Table  Based  npon  the  Average  Anniutl  Local  Tax  Payments  and 
the  Average  Annual  Net  Income  Previous  to  any  Deduction  for  Taxes 
During   the  Period  1011-1920 

Percentage  of  net  income  paid  in  total  local  taxes 

Electric  Light  and  Power  Corporations  reporting  from  New  York  State 


■ 

Num- 
ber 

in 
class 

Number  Paying 

class 

Less 
than 
10% 

10% 

to 

19.9 

2 
13 

7 

1 
23 

20% 

to 

29.9 

4 
4 
4 

12 

30% 

to 
39.9 

1 
1 

40% 

to 
49.9 

1 

1 
2 

50%  60% 

to  ,   to 
59.9  69.9 

1 
2         1 

•    •               •   • 

2        2 

260% 

to 
269.9 

a 

Operating  revenue  $1,000,000  or  over 

B 

Operating  revenue  $100,000  to  ?999,999 

C 

Operating  revenue  $25,000  to  199.909 

D 

Operating  revenue  less  than  $25,000 

8 
21 
13 

3 

45 

1 
1 

■   •   •        • 

1 

Total 

2 

1 

TABLE  74 

Relation  of  Total  Local  Taxes  to  Xet  Income,  Gas  and 

Electric  Corporations  in  Xew  York  State 

(Combining  gas  and  electric  service.) 

Frequency  Table  Based  upon  the  Average  Annual  Local  Tax  Payments  and 
the  Average  Annual  Net  Income  Previous  to  any  Deduction  for  Taxes 
During  the  Period  1911-1920 

Percentage  of  net  income  paid  in  total  local  taxes 

Gas  and  Electric  Corporations  reporting  from  New  York  State 


class 


Operating  revenue  $1,000,000  or  over. 


B 
Operating  revenue  $100,000  to  $999,999. 

Total 


Number  Payinc 

Num- 
ber 

1 

in 
class 

10% 

to 

14.9 

15% 

to 
19.9 

20% 

to 
24.9 

25% 

to 
29.9 

30% 

to 
34.9 

40% 

to 
44.9 

50% 

to 
54.9 

55% 

to 
59.9 

7 

.  . 

2 

1 

2 

1 

1 

. 

12 

2 

3 

1 
2 

1 
3 

2 
3 

1 

1 
1 

1 
1 

19 

2|     5 

1 

74% 

to 
79.9 


1 
1 


84 


TABLE  75 

Relation  of  Total  Local  Taxes  to  Xet  Income,  Manufac- 
tured Gas  Companies  in  ]N^ew  York  State 

Frequency  Table  Based  upon  the  Average  Annual  Local  Tax  Paijments  and 
the  Ai'erage  Annual  Xet  Income  Previous  to  any  Deduction  for  Taxes 
During  the  Period  1911-1920 

Percentage  of  net  income  paid  in  total  local  taxes 

Manufactured  Gas  Companies  reporting  from  New  York  State 


Num- 

Number Paying 

1 

CLASS 

ber 

in 

class 

10% 

to 

19.9 

20% 

to 
29.9 

30% 

to 
39.9 

40% 

to 
49.9 

60% 

to 
69.9 

80% 

to 
89.9 

90% 

to 
99.9 

100% 

to 
109.9 

130% 

to 
139.9 

A 

Operating  revenue  $1,000,000  or  over. 

2 

1 

1 

B 

Operating  revenue  $100,000  to  $999,999 

8 

2 

3 

1 

1 

1 

C 
Operating  revenue  $25,000  to  $99,999 . 

5 

1 

,    , 

1 

1 

,    , 

2 

.. 

.... 

Total 

15        4 

3 

1 

1 

1 

2 

1 

1 

1 

TABLE  76 

Relation  of  Total  Local  Taxes  to  ^et  Income,  ;N'atural 
Gas  Companies  in  New  York  State 

Frequency  Table  Based  upon  the  Average  Annual  Local  Tax  Payments  and 
the  Average  Annual  Net  Income  Previous  to  any  Deduction  for  Taxes 
During  the  Period  1911-1920 

Percentage  of  net  income  paid  in  total  local  taxes 

Natural  Gas  Companies  reporting  from  New  York  State 


Num- 
ber 
in 
class 

Number  Paying 

CLASS 

Less 
than 

5% 

5% 

to 

9.9 

1 
2 

3 

10% 

to 

14.9 

2 
1 

3 

15% 

to 

19.9 

1 
1 

2 

20% 

to 
24.9 

1 
1 

2 

25% 

to 
29.9 

2 
2 

45% 

to 

49.9 

1 
1 

65% 

to 
59.9 

1 

1 

65% 

to 
69.9 

1 
1 

105% 

to 
109.9 

A 

Operating  revenue  $1,000,000    or 
over 

2 
6 
7 
3 

1 

1 

B 
Operating    revenue    $100,000     to 
$999,999 

C 
Operating     revenue     $25,000    to 
$99,999 

1 

D 

Operating  revenue  less  than  $25,- 

000 

•  •  •   • 

Total 

18 

2 

1 

<> 


-» » 


85 


TABLE  77 

ItELATlON    OF    ToTAL    LoCAL    TaXES    TO    Net    InCOME,    All    GaS 

AND  Electric  Companies  in  New  York  State 

Frequency  Table  Based  upon  the  Average  Annual  Local  Tax  Payments  and 
the  Average  Annual  Net  Income  Previous  to  any  Deduction  for  Taxes 
During  the  Period  1911-1920 

Percentage  of  net  income  paid  in  total  local  taxes 

All  Gas  and  Electric  Companies  reporting  from  New  York  State 


Num- 
ber 
in 

class 

NUMBEE 

RAYING 

CLASS 

Less 
than 
10% 

10% 

to 

19.9 

6 

23 

9 

1 
39 

20^0 

to 

29.9 

7 

10 

5 

2 
24 

30% 

to 

39.9 

1 

2 

1 

1 
5 

40% 

to 

49.9 

2 

3 
5 

50% 

to 

59.9 

4 

1 

5 

60% 

to 

69.9 

1 
2 

1 
4 

70% 

to 

79.9 

1 

1 

80% 

to 

89.9 

2 



2 

90% 

to 

39.9 

1 

1 

100% 

to 
109.9 

130% 

to 
139  9 

260% 

to 
269.9 

A 

Operating   revenue   $1,000,- 
000  or  over 

19 

47 

25 

6 

1 
3 

2 

1 

1 
1 

1 

B 

Operating  revenue  $1CO,000 
to  $999,999 

C 
Operating  revenue    $25,000 
to  $99,999 

•  ■  ■  •  • 

1 

D 

Operating  revenue  less  than 
$25,000 

Total 

97 

7 

2 

1 

1 

The  wide  variations  shown  in  these  tables  make  difficult  a 
comparison  of  the  average  burden  in  each  of  the  different  groups. 
This  comparison  is  permitted  by  the  following  table,  in  which 
the  median  case  has  been  selected  as  representative  of  each  group. 


t 


80 


TABLE  78 
Average  Fiatio  of  Total  Local  Taxes  to  :Xet  Lxcome 

Public  Service  Corporations  in  New  Ymk  State,   1911-1920 

The  average  employed  in  each  case  is  the  median;  thus  one-lialf  of  the 
total  number  of  corporations  included  in  each  of  the  given  crroups  paid 
more  than  a  given  percentage  of  their  net  income  in  nieeliii^  the  taxes 
named,  wliile  one-half  paid  less. 

Averajte  Ratio.  Total 
Local  Taxes  t<»  Net 
Income  ( expresj-ed 
as  a  percentage  re- 
lation) 


Class  of  Utility 

Electric  Railways   

Telephone  and  Telegraph . .  . 
Gas  and  Electric: 
Electric  Light  and  Power. 
Gas    and     Electric     (com 

bined)     

Gas   ( manufactured )    .... 
■  Gas    (natural)    

Total  Gas  and  Electric 


Number     of     Coip<»ra- 
tions    Included 


56 

112 

50 

66 

18 

.44 

50 

20. 

22 

28. 

33 

18 

55, 

18 

17. 

5 

108 


2'S .  30 


When  a  company  representative  of  the  profitahle  concerns 
each  group  is  selected,  the  followino-  ratios  are  secured : 


in 


TABLP:  79 
A  VET?  age  TiATio  of  Total  Local  Taxes  to  ^et  Ixcome 

Public  Service  Corporations  Operating  at  a  Profit,  1911-1920 
(Excluding  corjiorations  showing  a  deficit) 


Class  of  Utility 

Electric  Railways   

Telephone  and  Telegraph.  . .  . 
Gas  and  Electric: 
Electric  Light  and  Power.  . 
Gas     and     Electric      (com- 
bined )     

Gas    ( manufactured )    

Gas    (natural)    

Total  Gas  and  Electric 


Number     of     Corpora 
lions    Included 


45 


19 
15 

18 


Avera^'' 
Local 

Katio 
Taxes 

Total 
to  Net 

Income       *ex 

pressed 

ra- 

as  a   percentajr<?   re- 
lation) 

34 

34.16 

62 

18.91 

25.8 
35.0 
17.5 

18.33 

97 


21.00 


^> 


87 

Marked  variations  are  found  in  each  table,  the  differences  being 
greater  in  the  first  case,  where  the  ratios  are  based  upon  all 
companies. 

In  determining  the  weight  of  local  taxes  it  is  desirable  to  sup- 
plement the  above  figures  by  ratios  based  on  aggregate  taxes  and 
aggregate  net  income.  These  ratios  are  shown  in  the  following 
table : 


TABLE  80 

Ratio  of  Aggregate  Local  Taxes   (Special  Franchise  and 
General  Property)  to  Aggregate  Net  Income 
Public  Service  Corporations  in  New  York  State,  1911-1920 

The  ratio  for  each  class  is  the  percentage  relation  of  aggregate  local  taxes 
(special  franchise  and  general  property)  to  aggregate  net  income.  The  aggre- 
gate figures  used  are  the  sums  of  ten-year  averages  for  each  of  the  corporations 
included.* 


Ratio  of  Aggregate 
Local  Taxes  (special 
franchise  and  gen- 
eral property)  to 
Net  Income  (ex- 
pressed as  a  per- 
centage   relation) 

25.5 

48.22 

12.10 


Number     of     Corpora- 
Class  of  rtility  tions    Included 

Steam  Railroadsf 109 

Electric  Railways 56 

Telephone  and  Telegraph ....  66 

Gas  and  Electric: 

Electric  Light  and  Power . .  50 

Gas     and     Electric      (com- 
bined )    22 

Gas     ( manufactured ) 18 

Gas    ( natural ) 18 

Total  Gas  and  Electric 108 


21.1 

28.9 
23.5 
10.3 


21.30 


Excluding  corporations  operating  at  a  loss  during  the  period 


1911-1920  the  following  ratios  are  secured: 


^  *  For  the  basis  of  tlie  steam  railroad  figures,  cf.  sujjra,  p.  liS. 
7"  This  ratio  is  28.6  when   operating  roads  only  are  included. 


yl 


*>  4 


88 


89 


TABLE  81 

Ratio  of  Aggregate  Local  Taxes  (Special  Franchise  and 
General  Property)  to  Aggregate  !N^et  Income 

Public  Service  Corjxirations  Operating  at  a  Profit,  1011-lf>20 

(Excluding  corporations  showing  a  deficit) 

Ratio  of  Aggregate 
Local  Taxes  (special 
franchise  and  gen- 
eral property)  to 
Net  Income  (ex- 
presse«l  as  a  per- 
centage  relation) 

24.6 


Number     of     Corpora- 
Class  of  I'tility  tions    Included 

Steam  Railroads*    87 

Electric  Railways   34 

Telephone  and  Telegrapht ...  <>2 

Gas  and  Electric: 

Electric  Light  and  Power.  .  45 

Gas     and     Electric      (com- 
bined)       19 

Gas    ( manufactured ) 15 

Gas  (natural )    18 

Total  Gas  and  Electric 97 


38.05 
12.10 


21.0 

24.6 
22.9 
10.3 


20.50 


All  the  figures  which  have  been  presented  in  this  section  indi- 
cate that  present  State  and  local  taxes  are  levied  upon  bases  which 
cause  them  to  fall  with  very  unequal  weight  upon  the  different 
utility  groups  and  upon  the  individual  corporations  within  any 
given  class.  This  is  true  not  only  of  the  property  taxes,  discussed 
in  the  last  section,  but  of  the  gross  earnings,  excess  dividends, 
and  capital  stock  taxes  which  are  paid  to  the  State.  As  between 
the  different  utility  groups,  and  within  any  given  utility  group, 
the  burden  of  present  taxes  is  markedly  unequal. 

Comparison  Between  Public  Utilities  and  Business  Cor- 
porations.—  In  studying  the  burden  of  taxes  on  different 
classes  of  corporations,  business  corporations  have  been  used 
as  a  standard,  Ijccause  of  the  fact  that  the  chief  tax  on  these 
institutions  is  now  levied  on  a  straight  net  income  basis.  In 
undertaking  to  compare  the  public  utilities  with  business  corpora- 
tions   it    is    necessary    to    determine    what    taxes    paid    by    the 

*  This  ratio  is  28.2  when  operating  roads  only  are  included. 

t  This  ratio  heconies  18,6  per  cent  when  returns  from  one  large  company,  primarily 
a  holding  company',  are  excluded. 


former  group  are  comparable  with  the  net  income  tax  paid  by  the 
latter  class.  In  the  pages  immediately  following  the  compariso:: 
is  made  on  three  different  bases."* 

In  the  first  table  taxes  paid  by  public  utilities  directly  to  the 
State  (on  gross  earnings,  excess  dividends  and  capital  stock)  arc 
compared  with  the  4^4  per  cent  tax  on  the  net  income  of  business 
corporations.  In  the  second  comparison  the  tax  paid  on  in- 
tangible elements  in  special  franchise  values  is  added  to  the  State 
taxes  of  public  service  corporations.  This  seems  to  be  a  more 
legitimate  comparison  than  the  former,  since  the  tax  on  intangible 
elements  in  special  franchise  values  is  not,  in  the  economic  sense, 
a  direct  tax  on  property.  In  the  final  comparison  personal  prop- 
erty taxes  paid  by  public  service  corporations  are  combined  with 
the  two  types  mentioned  above,  and  the  burden  of  all  these  taxes 
is  compared  with  the  burden  of  the  net  income  tax  on  business 
corporations.  Since  the  latter  tax  replaces  all  taxes  but  those 
on  real  property,  it  seems  just  to  set  against  it  all  taxes  paid  by 
public  utilities  which  are  not  based  on  real  property  (speaking 
again  from  the  economic  and  not  the  legal  point  of  view),  on 
or  off  the  streets. 

The  material  necessary  for  comparing  the  burden  of  the  State 
taxes  paid  by  public  utilities  with  the  burden  of  the  net  income 
tax  paid  by  business  corporations  has  already  been  presented. 
It  is  summarized  in  the  following  table.  Only  those  corpora- 
tions operating  at  a  profit  have  been  included. 


*  An  ncfurate  foni))aris<)n  of  the  l)urden  of  total  taxes  on  l)nsiness  corporations 
with  the  burden  of  total  taxes  on  public  utilities  is  not  possible,  because  of  differ- 
ences in  tho  detinitiou  of  real  ami  p<'rsonal  i>ropertv  for  these  tw«»  elas.ses  of 
corporations. 


90 


TABLE  82* 

Pekcextage  of  Net   Ixco:me   Paid  ix  State   Taxes 

Business  Corporations  and  Public  Service   Corporations  in  New  York  State 

The  business  corporation  tax  on  which  this  table  is  based  is  that  levied 
under  Art.  (>-a  of  the  Tax  Law.  The  public  utility  taxes  included  are  those 
on  gross  earnings,  excess  dividends  and  capital  stock. 

The  ratio  for  each  class  of  public  utility  is  the  percentage  relation  of 
aggregate  State  taxes  to  aggregate  net  income.  The  aggregate  figures  used 
are  the  sums  of  ten-year  averages  (1911-11)20)  for  each  of  the  corporations 
included .f  The  base  in  each  case  is  net  income  before  any  taxes  have  been 
deducted. 

nioco  ^ft^  X.  Ratio  of  State  taxes 

Chiss  of  Corporation.  to  not  income 

Business  corporations  (mercantile  and  manufacturing)  4.30 

Steam  Railroads   2  65 

Electric  Railways    6  35 

Telephone  and  Telegraph 4  10 

Gas  and  Electric: 

Electric  Light  and  Power 2.7 

Gas  and  Electric  ( combined ) 3^5 

Gas    (manufactured)    4' j 

Gas   ( natural )    j  5 

Total  Gas  and  Electric 2.80 


The  figures  presented  indicate  that,  with  the  exception  of  elec- 
tric railways,  the  public  utilities  pay  a  smaller  percentage  of  their 
net  income  in  State  taxes  than  business  corporations  pay  in  meet- 
ing the  net  income  tax.  The  latter  figure  appears  as  but  4.3 
per  cent  of  net  income  because  the  net  income  used  as  a  base  is 
net  income  before  any  taxes,  property  or  otherwise,  have  been 
deducted.  In  comparison  with  this  figure  steam  railroads  pay- 
but  2.65  per  cent,  gas  and  electric  companies  2.8  per  cent,  tele- 
phone and  telegraph  companies  4.1  per  cent,  and  electric  railways 
6.35  per  cent  of  their  net  income.ij: 

*     The    fdllnwiiig    ratios    have    l)oen     worked     out    indepeiulontlv    for     the     years 
19i3-ir)-17-18.     Th<\v  aro  based  upon  the  average  State  taxes  paid  in   those  vears 
and  the  average  net  income  earix'd  from  Xi'w  York  business  bv  the  diflferent  classes 
Of  public  service  corporations  : 

^,  -  ,..,.*  Ratio  of  State  Taxes 

Chiss  of  I  tihty  to  net  income 

Steam    railroa.ls    2. 20  per  cent 

Eleetrie    railways    s.^-,  p^r  cent 

Telephone    and    telej;iaph .3  4*^  per  cent 

Gas  and  electric 0.28  per  cent 

These  figures  which  are  based   upon   returns  from  all  the  public  utilities  in   the 
T      \^'   %^P'*'  ^^  ^   check   upon   the   results   secured   from   the  sample   group   studied 
It  Should  be  pointed  out  that  these  ratios  are  not  in  all  respects  comparable  to 
those  given   above   in   Table  82.  h  1      « 

t  For  the  basis  of  the  steam  railroad   figures,  cf.  Huprn,  p.  .S8. 

I,-?  w  tTJ^**^"  should  again  be  drawn  to  the  fact  that  the  "net  income"  upon 
Which  these  ratios  are  based  is  not  exactly  the  same  for  business  corporations  and 
for  public  service  corporations.  The  differences  are  not  great  enough  seriously  to 
affect  the  ratios  presented.     Cf.  p.  11.  supra. 


4 


91 


A  fairer  comparison  is  secured  if  the  taxes  paid  by  public 
utilities  on  the  intangible  elements  in  their  special  franchise 
values  are  included  with  State  taxes.  The  following  table  shows 
the  percentage  of  net  income  paid  by  public  utilities  in  meeting 
these  combined  taxes,  in  ('omparison  with  the  franchise  tax  paid 
by  business  corporations. 


TABLE  83t 

Percextage  of  >>et  income  Paid  in  State  Taxes  Plus  Taxes 
ON  Intangible  Elements  in  Special  Franchise  Values 

Public  Service  Corporations  in  New  Yark  State  

Ratio  of  State  taxes  plus 
taxes  on  intangible  ele- 
ments in  special  fran- 
chise values  to  net 
income 

Class  of  I'tility  Percentage 

Steam  Railroads S.  74 

Electric  Railways  15 .  40 

Telephone  and  Telegraph 7.10 

Gas  and  Electric 7 .  15 


When  the  taxes  on  intangible  elements  in  special  franchise 
values  are  included  with  State  taxes  the  public  service  corpora- 
tions, with  the  single  exception  of  steam  railroads,  are  seen  to  be 
paying  a  larger  percentage  of  net  income  in  meeting  these  taxes 
than  the  business  corporations  pay  under  article  9-a.  This  tax, 
it  was  noted,  amounted  to  4.3  per  cent  of  net  income.  The  burden 
is  materially  heavier  in  the  case  of  electric  railways,  which  pay 
15.4  per  cent  of  their  net  income  on  these  taxes.*  The  difference 
is  less  ill  the  telephone  and  telegraph  and  gas  and  electric  groups, 
while  steam  railroads  show  the  smallest  percentage. 

t  The  following  ratios  are  based  upon  complete  returns  from  all  public  utilities 
in  New  York  State  for  the  years  1013-10-17-18.  For  all  groups  except  telephone 
and  telegraph  companies  the  ratios  are  less  than  in  the  table  based  upon  ten-year 
av<M'ages  : 

Ratio  of  State  taxes  plus 
taxes  on  intangible  ele- 
ments in  special  fran- 
chise values  to  net  in- 
come 

Class  of  Utility  Percentage 

Steam  railroads  n  .23 

Electric    railways    14. 12 

Telephone    and    telegraph 7 .  10 

Gas  and   electric 6 .  52 

*As  in  the  preceding  table  these  ratios  are  based  upon  aggrega  >  taxes  and 
aggregate  net  income  for  sample  groups  from  each  class.  Only  corporations 
operating  at  a   profit  have  been  included. 


* 


I 


92 

For  the  final  comparison  taxes  paid  on  personal  property  by 
public  service  corporations  are  included  with  State  taxes  and 
taxes  on  intangible  elements  in  special  franchise  values.  This 
combination  includes  all  taxes  not  levied  on  real  property,  and  is 
thus  directly  comparable  with  the  net  income  tax  on  business  cor- 
porations. The  latter  replaces  all  franchise  taxes  and  personal 
property  taxes,  it  will  be  recalled. 

The  following  table 'shows  the  percentage  of  net  income  paid 
in  these  combined  taxes. 


TA]]LE  84- 

Percextage  of  Xet  Ixcome  Paid  in  State  Taxes  Plus  Taxes 
ox  Personal  Property  axd  Taxes  ox  Intangible  Ele- 
ArENTs  IN  Special  Franchise  Values 

Puhlic  Sen-ice  Corporations  in  Xeir  York  State 

Rjitlo  of  state  Taxes 
Phis  Personal  Prop- 
erty Taxes  and 
Taxes  on  Intanjrible 
Klenientis  in  Snecial 
Franchise  Values  to 

^1  4-  ^'^1'.  ^'^'f  Income. 

Class  of  Lttlity  Percentage 

Steam  Railroads   3. 88 

Klectric  Railways   15. ({0 

Telephone  and  Telegraph 7 .  20 

Ga.s  and  Electric 7 .  40 


From  the  above  tables  it  is  apparent  that  when  all  public  utility 
taxes  other  than  those  on  real  property  are  expressed  in  terms  of 
yiet  income  there  are  striking-  inequalities  of  burden  as  between 
the  different  utility  groups.  When  these  burdens  are  compared 
with  that  borne  by  busines  corporations  taxed  under  article  0-a 

*  The  folhnvlnf^  ratios  are  Imsed   upon   complete   returns  from   all   public   utilities 
in  New  York  State  for  the  years  1013   1.'-17-1S. 

Ratio  of  State 
taxes  plus  taxes 
on  intangible  ele- 
ments In  special 
franchise  values 
and  personal 

property   taxes   to 
net  income 

Class  of  Utility  Percentage 

Steam  railroads q  q? 

Electric    railways    1 4  *  n«' 

Telephone  and  telegraph .'  [[ 7 '  ^fi 

<ias  and   electrie '  ' '  ' 7  '>4 

These  ratios  are  based  upon   returns  from   a   larger  group   than  are  the   ratios 
given  in  Table  84.  but  represent  conditions  for  four  years  only    (1913-15-17-18). 


<5^ 


9:3 


it  is  seen  that  all  the  public  service  corporations,  with  the  excep- 
tion of  steam  railroads,  pay  more  than  do  business  corporations. 
The  latter  pay  approximately  4.3  per  cent  of  net  income  (taking 
as  the  base  net  income  before  property  taxes  have  been  deducted). 
Comparable  taxes  for  steam  railroads  amounted  to  3.88  per  cent 
of  net  income.  For  telephone  and  telegi'aph  companies  the  figure 
is  7.2  per  cent,  and  7.4  jxjr  cent  for  gas  and  electric  companies. 
Electric  railways  show  the  highest  percentage,  the  amount  paid  in 
State  taxes,  taxes  on  intangible  elements  in  special  franchise 
values  and  taxes  611  jKusonal  property  amounting  to  15.(5  j)er  cent 
of  net  income. 

The  complexities  in  the  present  system  of  taxing  public  utilities 
have  been  brought  out.*  The  fact  that  present  taxes  fall  with 
very  unequal  weight  upon  the  individual  corporations  within  any 
group  has  been  demonstrated.  It  has  been  shown  that  the  different 
utility  groups  are  not  on  equal  terms  in  the  matter  of  tax  burden, 
when  that  burden  is  expressed  in  terms  of  net  income.  In  the 
final  section  the  burden  of  taxes  on  the  chief  classes  of  public 
service  corporations  has  been  compared  with  the  burden  of  taxes 
on  mercantile  and  manufacturing  corporations. f  The  fi^gures 
there  presented  have  shown  that  business  corporations  and  public 
service  corporations  bear  unequal  tax  burdens,  the  public  utility 
groups,  with  one  important  exception,  paying  more,  in  terms  of 
net  income,  than  do  mercantile  and  manufacturing  corporations. 

The  relation  between  taxes,  net  income  and  gross  income  of 
public  utilities. —  In  the  preceding  study  of  the  relative  burden  of 
taxes  upon  public  service  corporations  in  New  York  State,  net  in- 
come has  been  used  as  the  chief  standard  of  comparison.  Xet  income 
as  here  used  is  gross  incx)me  less  interest  charges  and  certain  other 
deductions.  This  standard  has  certain  defects,  chief  of  which  is 
one  which  arises  from  the  varying  methods  employed  by  different 
public  utilities  in  securing  capital.  The  net  income  of  a  company 
securing  most  of  its  capital  by  bond  issue  would  be  relatively 
small,  while  the  corresponding  figure  for  a  company  financed  by 
the  sale  of  stock  would  be  much  greater.     The  two  might  be  in 

♦  Cf.  Hiipra,  p.  10. 

*  All  real   property  taxes  paid  by  both  groups  have  been  excluded  in  making  this 
compariRon. 


94 


positions  of  equal  strength,  yet  if  the  burden  of  taxes  were  meas- 
ured on  the  net  income  basis  the  former  would  appear  to  be  in 
a  position  distinctly  less  favorable  than  the  latter.  It  is  desirable, 
therefore,  to  determine  the  relative  importance  of  interest  charges 
and  other  deductions  from  gross  income  for  the  various  classes  of 
public  utilities  in  New  York  State. 

This  comparison  has  been  made  for  the  six-year  period  1912— 
1917,  inclusive.  The  four  chief  classes  of  public  utilities  report- 
ing to  the  New  York  State  Public  Service  Commission  have  been 
included.  'No  attempt  has  been  made  to  allocate  either  net  or 
gross  income  to  New  York,  or  to  separate  New  York  taxes  from 
others.  We  are  desirous  of  determining  the  general  relations 
between  tax  payments  and  net  and  gross  income,*  and  for  this 
purpose  no  allocation  is  required. 

The  details  of  this  comparison,  bv  years,  are  presented  in 
tables  XV,  XVI,  XVII  and  XVIII  in  the  Apr>endix.  The  fol- 
lowing is'  a  summary,  showing  the  relations  between  the  average 
annual  gross  income,  deductions  from  gross  income,  net  income 
and  tax  accruals,  for  the  different  public  utility  groups. 

*  Gross  income  is  the  sum  of  operating  income  (i*.  e.,  gross  operating  revenues 
less  operating  expenses,  taxes  assigne<l  to  operations  and  uncollectible  revenues) 
and  non-operating  income,  the  latter  composed  of  such  net  items  as  rents  and 
interest  and  dividends  received. 


«| 


95 


TABLE  85 


CoMPAKisox  Between  Gross  Income,  Deductions  From  Gross 
Income,  Net  Income  and  Tax  Accruals 

Public  Service  Corporations  in  New  York  State 
(Based  on  Average  Annual  Figures,  1912-1917) 


Class  of  utility 


Steam  railroads 

Electric  railways 

Telephone  companies 

Gas  and  electric  companies 


Gross  income 


1255,133.333 
52,163,576 
64,300.080 
53,825,744 


Deductions 

from 

gross 

income 


$146,458,499 
38.759,513 
14,564,952 
20,969,034 


Net  income 


$108,674,833 
13,404,063 
49,735,138 
32,856,709 


Ratio  of 

total 

deductions 

from  gross 

income 

to  gross 

income 

(percentage) 


57.13 
74.30 
22.65 
38.95 


Ratio  of 

Ratio  of 

tax  accruals 

tax  accruals 

Gross  income 

Net  income 

to  gross 

to  net 

Class  of  utility 

Tax  accruals 

before 
deduction  of 

before 
deduction  of 

income  before 
deduction 

income  before 
deduction 

tax  accruals 

tax  accruals 

of  tax 

accruals 

(percentage) 

of  tax 

accruals 

(percentage) 

Steam  railroads 

$31,949,333 

$287,082,666 

$140,624,166 

11.13 

22.71 

Electric  railways 

8,116,185 

60,279,761 

21,520,248 

13.46 

37.71 

Telephone  companies. . 

4,971,285 

69,271.366 

54,707,423 

7.17 

9.09 

Gas  and  electric  com- 

panies  

7,740,447 

61,566,191 

40,597,155 

12.58 

19.10 

The  varying  importance  of  the  gross  income  deductions  is 
hrought  out  in  the  column  showing  the  ratio  of  these  deductions 
(consisting  chiefly  of  interest  charges  and  rentals)  to  gross  income. 
For  telephone  companies  they  constitute  hut  22.65  per  cent  of 
gross  income,  while  for  electric  railways  these  deductions  are 
74.30  per  cent  of  gross  income.  Gas  and  electric  cor}x>ration9 
and  steam  railroads  stand  between  these  two  limits,  the  figure  for 
the  former  being  38.95  per  cent  and  for  the  latter  57.13  per  cent. 
These  figures  indicate  the  relative  importance  of  the  various 
methods  of  securing  capital  employed  by  the  different  utilities, 
the  electric  railways  being  distinctly  more  dependent  upon  bor- 
rowing, with  definite  contractual  obligations,  than  are  the  other 


i 


^1 


0() 


97 


utilities.      Xet    incoine,    after    these   coiitiactual   deductions   are 
made,  will  be  correspondingly  lower. 

These  differences  are  more  sharply  brought  out  by  the  figures 
showing  the  relation  of  tax  accruals  to  gross  and  net  income.  For 
telephone  companies  tax  accruals  constitute  but  9.09  per  cent  of 
net  income  (before  deduction  of  tax  accruals),  the  corresponding 
figure  for  electric  railways  being  37.71  per  cent.  Steam  railroads 
and  gas  and  electric  corporations  show  less  variation,  the  former 
being  22.71  per  cent,  and  the  latter  19.10  per  cent. 

These  wide  variations  are  not  entirely  ironed  out,  but  become 
much  less  pronounced,  when  gross  income  is  used  as  the  standard 
of  comparison.  Electric  railways  still  stand  at  the  upper  limit, 
taxes  constituting  13.46  per  cent  of  gross  income,  and  telephone 
corporations  are  at  the  lower  limit  with  a  ratio  of  7.17  per  cent, 
but  the  spread  between  the  two  is  less  marked.  Were  the  non- 
operating  income  of  the  latter  group  excluded,  the  difference 
would  be  less  pronounced.  Steam  railroads  have  a  ratio  of  11.13 
per  cent,  and  gas  and  electric  companies  a  ratio  of  12.58  per  cent. 

Not  income  is  not,  therefore,  a  perfect  standard  for  measuring 
the  burden  of  taxes.  Insofar  as  there  are  variations  in  the 
methods  employed  in  securing  capital,  this  standard  is  imperfect. 
The  extent  to  which  these  variations  exist  and  their  effect  upon  the 
tax  ratios  for  the  different  classes  of  utilities  have  been  indicated 
above. 

The  Burden  of  Taxes  on  Insurance  Companies 

Insurance  companies  doing  business  in  New  York  State  are 
taxed  on  their  gross  premiums  le«s  certain  deductions  allowed  by 
law.*  It  is  desirable  to  determine  the  relative  burden  of  these 
taxes  upon  the  individual  insurance  companies,  and  upon  the 
insurance  companies  as  a  whole,  in  comparison  with  other  classes 
of  corporations.  Securing  a  standard  of  comparison  is  not  [possible 
for  certain  classes  of  insurance  companies,  notably  mutual  life 
insurance  companies.  Difficulties  are  also  encountered  in  con- 
nection with  companies  doing  casualty  and  accident  business.  For 
these  classes  of  corporations  a  figure  directly  comparable  to  the 
net  income  of  business  corporations  or  public  utilities  cannot  be 

*  Cf.  811  pro,  p,  10. 


<^^ 


secured.  For  fire  and  fire  and  marine  stock  companies  it  is  pos- 
sible, however,  to  approximate  the  net  profits  derived  from  New 
York  business.  These  figures  have  been  secured  for  the  ten-year 
period  1911—1920,  inclusive,  and  have  been  used  as  a  standard 
for  determining  the  burden  of  taxes  paid  on  gross  premiums 
during  this  period.* 

The  general  procedure  in  determining  net  profits  from  New 
York  business  has  been  as  follows:  The  net  underwriting  profit 
for  the  period  in  question  has  been  determined  by  subtracting 
from  the  total  amount  received  as  net  premiums  from  New  York 
business  the  amount  of  losses  paid  in  New  York  State  plus  40 
j)er  cent  of  the  net  premiums.  The  latter  figure  represents  general 
underwriting  expenses,  the  figure  of  40  per  cent  being  the  average 
relation  of  such  expenses  to  net  premiums.  A  correction  has  been 
made  for  the  lag  between  losses  incurred  and  losses  paid.  To  net 
underwriting  profit  as  thus  determined  an  allocated  portion  of  the 
gain  from  investments  has  been  added, f  the  sum  being  net  profits 
from  business  in  New  York  State.  Inasmuch  as  taxes  have  been 
deducted  in  securing  this  figure,  being  included  in  the  expense 
item,  they  are  added  back.  The  ratio  of  taxes  to  the  base  thus 
secured  is  then  worked  out.  An  exact  determination  of  the  net 
profit  from  New  York  business  is  impossible,  but  the  above  method 
gives  an  approximation  sufficiently  close  for  the  purpose. 

The  following  table  present  the  results  secured  by  these  calcula- 
tions. Tiie  figures  apply  to  domestic  companies  and  foreign  com- 
panies doing  business  in  this  State. 


*  It  should  be  noted  that  no  account  is  here  tak«n  of  other  taxes  or  license  fees. 
t  The  basis  of  allocation   has  been  the  relation   of  total   premiums   received   in 
New  Yorlt  to  total  premiums  written. 


98 


Pekcentage  of  Xet  Profits  From  ISTew  Yokk  Bfsixess 

Paid  in  Taxes  on  Oross  Premiums  in  New  Ywk,  1911-1020  Inclusive 
Fire  and  Marine  Insurance  Companies  Doing  Business  in  New  York  State 

'5 

>• 

a 

y. 

< 

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Number 

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1911-1920 

-IX 

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Number 
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Fire 

Fire  and  marine .  . 

< 

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99 


J 


The  variation  in  burden  on  the  general  classes  of  insurance 
companies  considered  is  apparent.  When  taxes  are  expressed  in 
terms  of  net  income  the  percentages  vary  from  less  than  1  per 
cent  to  over  25  per  cent  for  companies  operating  at  a  profit.  The 
largest  single  group  is  found  within  the  class  paying  from  5  per 
cent  to  6  per  cent  of  net  income  in  taxes.  As  representing  the 
average  situation  that  company  lying  midway  in  the  distribution 
(the  median)  may  be  selected.  Including  only  the  profitable  com- 
panies, the  median  has  a  value  of  5.35  per  cent.  For  fire  com- 
panies alone  the  value  is  5.1  per  cent,  and  for  fire  and  marine 
companies  alone  it  is  5.71  per  cent. 

In  securing  an  average  of  this  type  (the  median)  equal  weight 
is  given  to  all  companies,  large  or  small.  The  burden  of  taxes 
upon  the  group  as  a  whole  is  perhaps  better  represented  by  the 
ratio  of  the  aggregate  amount  paid  in  taxes  to  the  aggregate  net 
profit  from  business  in  the  State  of  New  York.  These  ratios  are 
presented  below,  all  companies  being  included  in  one  comparison 
and  only  the  profitable  companies  in  the  other. 


TAELE  87 

Relation  of  Taxes  on  Gross  Premiums  to  :t^ET  Profit  from 

New  York  Business 


Fire  and  Fire  and  Marine  Insurance  Companies 


Number   of   com- 
Class  of  insurance  panies  included 

Fire   *. gg 

Marine  and  fire  and  marine 

91 
All  companies  _———--—= 


Ratio  of  aggre- 
gate taxes  to 
aggregate  net 
profits  (ex- 
pressed as  * 
percentage  re- 
lation) 

4.76 

5.89 

5.75 


\\^J 


>  . 


100 


TABLE  88 

Eelatio]?^  of  Taxes  on  Gross  Premiums  to  :N'et  Profit  from 

^New  York  Business 

Fire  and  Marine  Insurance  Companies 
(Excluding  companies  operating  at  a  loss) 

Ratio  of  aggre- 
gate taxes  to 
aggregate  net 
profits  (ex- 
pressed as  a 
percentage  re- 
lation) 

4.10 
4.92 


ni„o„  ,*  •  Number   of   com- 

Class  of  insurance  panics  included 

Fire    

Marine  and  fire  and  marine qq 

Total ~ 


4.84 


The  ratios  based  upon  aggregate  figures  are  somewhat  greater 
for  companies  doing  a  marine  or  fire  and  marine  business  than 
for  the  fire  insurance  companies.  This  is  true  when  companies 
operating  at  a  loss  are  excluded  as  well  as  when  these  companies 
are  included. 

For  the  entire  group  of  91  companies  studied  (including  9 
companies  operating  at  a  loss)  the  taxes  on  gross  premiums 
amounted  to  5.75  per  cent  of  net  profits  from  New  York  business 
during  the  decade  1911-1920.  For  the  82  companies  reporting 
an  average  profit,  the  ratio  of  these  taxes  to  net  profits  was  4.84 
per  cent. 

The  frequeoicy  table  presented  a})ove  shows  that  present  taxes 
fall  with  unequal  weight  on  different  insurance  companies,  when 
net  profits  are  used  as  the  standard  of  comparison.  The  general 
position  of  the  insurance  companies  as  a  whole,  in  comparison 
^ith  financial  institutions,  business  corporations,  and  public  utili- 
ties may  be  determined  by  referencf^  to  the  tables  presented  in  the 
earlier  sections  of  this  report.* 

diffeTilft%^lX/i^^o?  cSr7o?a?fon^'^2lvri?ee*n'^de"r1?eT'?;".5?#e;'%*  ^^^.vf^"-  '-  '^^ 
based  upon  periods  of  varying  length  As  betwJpn  th^o  ii?.^''*^"*.  methods,  and  are 
they  should  be  used  to  establish  general  relations  o^Vv  ^'^^r^"*  ^'"''"P^-  therefore, 
for  other  classes  of  corporations  a^ppear  on  pp    -3    90^93  ^-^^^^Ponding  tables 


.  101 

Expenses  Involved  in  Paying  Taxes  and  Contesting  Assess- 
ments 

The  burden  cf  a  complicated  tax  system  is  not  measured  by  the 
amount  of  the  taxes  paid,  alone.  The  corporations  taxed  are  fre- 
quently put  to  considerable  administrative  and  other  expense  in 
complying  with  the  provisions  of  the  tax  law. 

An  investigation  to  determine  the  amount  of  these  expenses 
was  conducted  by  the  Committee,  all  public  service  corporations 
in  the  State  being  circularized.  Of  the  1628  corporations  to  which 
questionnaires  were  sent,  replies  were  received  from  717,  or  44.1 
per  cent  of  the  total  number.  Sixty-four  of  these  replies  were 
unsatisfactory.  Of  the  remaining  653  corporations,  323  reported 
either  that  no  expenses  were  involved  in  paying  taxes,  or  that  it 
was  impossible  to  segregate  these  expenses.  Figures  in  regard 
to  expenses  were  received  from  330  public  service  corj>orations. 
These  figures  are  summarized  in  the  following  table : 

TABLE  89 
Total  Expenses  Involved  in  Paying  Taxes 


Number    of 
replies 
stating  ex- 
Class  of  utility  expenses 

Steam  railroads 90 

Electric  railways    27 

Express  and  bus  companies  6 

Pipe  lines 3 

Water   transportation    ....  18 

Telephone   and  telegraph.  .  84 

Gas  and  electric 119 

Water  companies    43 

Total 330 


Total  annual 
expenses  in- 
volved in 
paying  spe- 
cial fran- 
chise tax 

$12,993 

8,798 

15 

445 

862 

21,864 

18,780 

1,707 


Total  annual 
expenses  In- 
volved in 
paying 
other  taxes 
(State  and 
local) 

$41,694 

17,631 

15,346 

280 

3,946 

32,420 

77,566 

2,521 


Total  annual 
expenses  in- 
volved in 
paying  all 
taxes 

$54,687 

26,429 

15,361 

725 

4,808 

54,284 

96,346 

4,228 


$65,464  $191,404  $256,868 


These  figures  indicate  the  amount  of  burden  in  the  form  of 
administrative  expense  to  which  public  service  corporations  are 
put  in  complying  with  the  present  tax  laws.  For  the  330  cor- 
porations from  which  figures  were  received,  these  expenses  amount 
to  more  than  one-quarter  of  a  million  dollars  annually.  The  total 
figure  for  all  corporations  in  the  State  would  exceed  this  amount, 
of  course. 


102 


In  addition  to  the  direct  cost  of  paying  taxes,  it  is  desirable  to 
determine  the  cost  of  contesting  assessments  of  special  franchises. 
The  following  table  presents  a  summai-y  of  the  returns  from  98- 
corporations  which  reported  such  costs. 


TABLE  90 

ExpEi^SEs  Involved  Ix^^  Contesting  Special  Franchise  Assess- 
ments 

PuhUc  Service  Corporations  in  New  York  State 

Number  of  replies 

stating   cost    of  Total  annual  cost 

rinsH  nf  nfiiu^                                   contesting      as-  of  contesting  as- 

Class  of  utility                                  sessments  sessments 

Steam  railroads    17  ^f.  „_- 

Electric  railways   V// ' '                        [l  lUi 

Water  transportation ^  nn 

Telephone  and  telegraph 5  ,  ^1: 

Gas  and  electric ]]"  "                        ^  a^'X^J 

Water  companies [][                         fj  ^^'^^ 

^****^ 98  $109,917 


The  replies  received  on  this  subject  do  not  give  a  complete 
account  of  the  situation  in  all  utility  groups,  but,  even  though 
limited,  indicate  the  importance  of  these  costs.  For  the  98  com- 
panies replying  the  annual  cost  of  contesting  special  franchise 
assessments  amounted  to  $109,917.  Adding  this  to  the  other 
expenses  of  paying  taxes  the  total  annual  expenses,  for  330  cor- 
porations alone,  amount  to  $366,785.  Of  this  total,  $175,381,  or 
48  per  cent,  represents  expenses  connected  with  the  payment  of 
the  special  franchise  tax. 

It  is  obvious  that  exact  figures  as  to  the  expenses  involved  in 
complying  with  the  tax  laws  of  the  State  are  unobtainable.  The 
average  corporation  has  no  means  of  segregating  such  expenses 
from  other  administrative  expenses.  The  figures  presented,  there- 
fore, are  to  be  taken  as  indicating  the  degree  of  expense  to  which 
taxpayers  are  put,  rather  than  as  measuring  these  costs  exactly. 
Even  with  this  qualification,  however,  the  replies  received  indicate 
how  considerable  are  these  administrative  and  legal  charges,  which 
constitute  a  burden  to  the  taxpayer,  even  though  they  bear  no 
fruit  for  the  State. 


STATISTICAL  APPENDICES  TO  PART  II 


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127 


TABLE  V-D.  INCOME  WHOLLY  EXEMPT  FROM  FEDERAL  INCOME 
TAX,  REPORTED  BY  TRANSPORTATION  AND  OTHER  PUBLIC  UTIL- 
ITIES AND  BANKS  AND  TRUST  COMPANIES,  STATE  OF  NEW  YORK 

(Corporation  income  and  profits  tax  returns  for  the  calendar  year  ending  December 
31.  1918.    Table  compiled  by  Statistical  Division,  Income  Tax  Unit,  Bureau  of 

Internal  Revenue)  *  t  x      . 

Interest  on 

Divi     nds  from  obligations 

INDUSTRIAL  GROUPS                                 other  corporations  .^^J-^f  ^ 

subject  to  United  States, 

federal  income  tax  etc. 


Transportation  and  other  public  utilities: 

Steam  railroads 

Electric  railways 

Electric  light  and  power 

Gas  companies 

Telephone  and  telegraph  companies 

Water  works 

Other  railroads 

Water  transportation 

Local  transportation  —  Cartage,  storage,  etc .  . 

All    other    public    utilities,    including   express 

companies 


$5,692,239 

1,146,248 

1,067,935 

2,208,624 

40,799,236 

307,495 

1,865,935 

894,073 

352,108 

2,983,391 


Banks  and  trust  companies: 

Banks  —  general  —  not  properly  defined,  or 
private  bankers 

National  banks 

State  banks 

Trust  companies 

Related  business,  including  —  Stock  and  bond 
brokers,  realty,  holding  and  development 
companies,  real  estate  loan  and  insurance 
agents,  holding  and  leasing  realty,  etc 


$475,708 

3,588,047 

129,556 

1,992,889 


7,621,828 


$727,272 

7,630 

152,087 

76,210 

136,405 

4,127 

100,380 

723,518 

54,321 

65,631 


Total,  transportation  and  other  public  utilities $57 , 317 , 284        $2 ,047,581 


$968,511 

4,208,761 

195,696 

3,005,057 


259,253 


Total,  banks  and  trust  companies 


$13,808,028   $8,637,278 


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131 


TABLE  VIII 

Comparison  of  Capital,  Surplus,  Aggregate  Resources  and 
Realty  Holdings  of  Banks,  Trust  Companies  and  Invest- 
ment Companies  in  the  State  of  IN'ew  York,  June  30, 
1920 

(Based  upon  the  reports  of  the  Comptroller  of  the  Currency  and  of  the  Super- 
intendent of  Banks  of  the  State  of  New  York) 


National 
banks 

State  banks 

Trust 
companies 

Investment 
companies* 

Savings 
banks 

Number  of  institutions. 

491 
$194,171,000 
355,224,000 

229 
$53,793,000 
76,303,000 

97 

$145,594,000 

208,355,000 

29 
$22,115,000 
6,187,000 

141 

Surplus  and  undivided 

nrnnt.s      

t$188,020.000 

Total  capital,  sur- 
plus   and   undi- 
vided profits..  .  . 

Aggregate  resources . . . 

Banking   houses,    fur- 
niture and  fixtures .  . 

$549,395,000 
5,573.517,000 

^42,935,000 
2,544,000 

$130,096,000 
1,460,557,000 

21,282,000 

$353,949,000 
3,563,321,000 

55,442,000 

$28,302,000 
134,861,000 

647.000 
304,000 

$2,588,320,000 

19,465.000 
4,972,000 

♦  The  classification  of  investment  companies  in  the  report  of  the.  State  Superintendent  of  Banks 
does  not  correspond  exactly  with  the  classification  set  up  in  the  Tax  Law.  The  figures  here  given 
follow  the  former  classification,  except  that  foreign  banking  corporations  are  excluded.  The 
condition  of  investment  companies  is  showTi  as  of  December  31,  1920. 

t  Surplus  on  market  value  of  stocks  and  bonds.  The  surplus  on  par  value  of  stocks  and  bonds 
amounted  to  $268,363,000. 

t  This  item  may  be  subdivided  into  "  banking  houses,"  $40,211,000,  and  "  furniture  and  fix- 
tures," $2,724,000. 


k\ 


'\ 


I- 


132 


TABLE  IX 
Summary  of  Financial  Institutions  in  New  York  State 

Reporting  to  the  Special  Joint  Legislative  Committee  on  Taxatim  and 

Retrenchment 


CLASS 


National  banks 

State  banks , 

Trust  companies 

Investment  companies 
Sa-v-ings  banks 


Total 

number 
reporting* 


401 

158 

82 

15 

135 


Number 
operating  at 
a  profit  (i.  e. 
reporting  a 
net  income, 
1918-1920) 


398 

156 

81 

15 

135 


Number 

operating 
at  a  loss 


8 

2 
1 


*The  numbers  given  in  certain  of  the  subsidiary  tables  do  not  exactly  correspond  to  these 
ngures.  Ihia  is  due  to  the  fact  that  replies  were  received  from  a  few  institutions  after  some  of  the 
tables  had  been  completed.  It  should  also  be  noted  that  the  corporations  Usted  above  and  included 
m  the  subsidiary  tables  are  only  those  from  which  complete  returns  were  received.  It  was  neces- 
sary to  exclude  certain  of  the  returns  received  because  of  deficiencies  in  the  data 


TABLE  X 

Capital,   Income,  and  Tax  Payments,   National  Banks  in 

New  York  State 

(Based  on  returns  to  the  Special  Joint  Legislative  Committee  on  Taxation  and 

Retrenchment) 

1918  1919  3920 

Number  of  complete  returns 397  397  397 

Capital,  surplus  and  undivided  profits  $400,820,656  $454,361,969  $517, 122,655 
Net  taxable  income  as  returned  to  the 
Commissioner  of  Internal  Revenue, 

United  States 52,819,551  66,079,715  70,651,281 

Deficits 187,743  206,347  104,625 

Dividends  received  from  other  cor- 
porations subject  to  Federal  Income 

tax* 790,357  832,824  1,351,164 

Non-taxable  interest  on  Federal  bonds.  3,060,626  4,604,525  5,028,755 

State  net  taxable  income 56,497,734  71,557,238  76,972,308 

I^eficits 14^943  245,621  45,733 

Bank  stock  tax  t 4,008,206  4,543,619  5,171,226 

General  property  tax 998,592  1,056,204  1,161,951 

Total  New  York  taxes  paid ^  5,006,798  5,599,823  6,333,177 

•  "^^uf  ^r^i.*  considerable  discrepancy  between  this  figure  for  1918  and  the  corresponding  item 
m  1  able  V-L>,  prepared  by  the  Bureau  of  Internal  Revenue.  In  computing  tax  ratios  the  above 
figure,  based  upon  returns  of  the  individual  banks  to  this  Committee,  has  been  used.  The  dif- 
ference affects  the  ratios  by  less  than  half  of  1  per  cent,  however. 

t  There  is  a  lag  of  one  year  in  the  annual  tax  payments  recorded  in  the  Report  of  the  Tax  Com- 
mission, as  compared  with  the  figures  given  above.     Thus  the  1920  figures  above  would  appear 
under  the  year  1921  (the  fiscal  year  in  which  received)  in  the  Report  of  the  Tax  Commission 
This  applies  to  the  tax  figures  for  all  financial  institutions. 


^; 


i^ 


133 


TABLE  Xa 
Relation  Between  Taxes  and  Net  Income,  Nationai.  Banks 

IN  New  York  State 


Greneral  property  tax  to  State  Net 
taxable  income* 

Bank  stock  tax  to  State  net  taxable 
income 

General  property  tax  plus  bank  stock 
tax  to  State  net  taxable  income* . . . 

jeneral  property  tax  to  capital,  sur- 
plus and  imdivided  profits 

General  property  tax  plus  bank  stock 
tax  to  capital,  surplus  and  imdivided 
profits 

Dividends  received  from  other  cor- 
porations to  State  net  taxable 
income 

Non-taxable  interest  on  Federal  bonds 
to  State  net  taxable  income 


1918 

1919 

1920 

srcentage 

Percentage 

Percentage 

1.7 

1.5 

1.5 

7.0 

6.3 

6.7 

8.8 

7.8 

8.2 

0.24 

0.23 

0.22 

1.2 


1.3 


5.3 


1.2 


1.1 


6.4 


1.2 


1.7 


6.5 


*  If  net  income  before  property  taxes  have  been  deducted  is  used  as  a  base,  the  following  per- 
centages are  secured: 


General  property  tax  to  net  income 

General  property  tax  plus  bank  stock  tax  to  net  income 


1918 

1919 

1920 

1.7 

1.5 

1.5 

8.7 

7.7 

8.1 

TABLE  XI 

Capital,  Income,  and  Tax  Payments,   State  Banks  in 

New  York  State 

(Based  on  returns  to  the  Special  Joint  Legislative  Conmiittee  on  Taxation  and 

Retrenchment) 

1918  1919  1920 

Number  of  complete  returns 157  157  157 

Capital,  surplus,  and  undivided  profits.      $67,339,913  $74,294,369  $97,559,078 

Net  taxable  income 7,490,900  11,568,099  14,403,961 

Deficits 38,797  227,943  39,843 

Dividends  received  from  other  cor- 
porations subject  to  Federal  tax. .              175,195  211,094  268,512 

Non-taxable  interest 518,711  987,878  954,677 

State  net  taxable  income 8,159,571  12,546,157  15,630,408 

Deficits 13,66^  7,029  43,101 

Bank  stock  tax 673,399  742,943  975,590 

General  property  tax 467,864  474,387  567,637 

Total  New  York  taxes  paid 1,141,263  1,217,330  1,543,227 


^ 


Il 


I 


134 


TABLE  XIa 
Relation    Between    Taxes    and   Income,    State 


General  property  tax  to  State  net 
taxable  income* 

Bank  stock  tax  to  State  net  taxable 
income 

General  property  tax  plus  bank  stock 
tax  to  State  net  taxable  income* 

General  property  tax  to  capital,  sur- 
plus and  undivided  profits 

General  property  tax  plus  bank  stock 
tax  to  capital,  surplus  and  undivided 
profits 

Dividends  received  from  other  cor- 
porations to  State  net  taxable 
income 

Non-taxable  interest  on  Federal  bonds 
to  State  net  taxable  income 


A.ND     INCOIVJ 

>KK  State 

[E,    State 

Banks   in 

1918 
Percentage 

1919 
Percentage 

1920 
Percentage 

5.7 

3.7 

3.6 

8.2 

5.9 

6.2 

13.9 

9.7 

9.8 

0.69 

0.63 

0.58 

1.7 


2.1 


6.3 


.*til2flir°r.if.^°^^  P^°P«^y  taxes  have  been  deducted  is  used 


1.6 


1.6 


7.8 


1.5 


1.6 


centages  are  secured 

General  property  tax  to  net  income. 

General  property  tax  plus  bank  stock  takto"  net 'income! 


6.1 

as  a  base,  the  following  pe^" 


1918        1919        1920 

5.4  3.6  3.5 

13.3  9.4  9.6 


IN 


TABLE  XII 
Capital,  Income,  and  Tax  Payments,  Tbust  Companies 

New  York  State 

(Based  on  returns  to  the  Special  Joint  Legislative  Committee  on  Taxation  and 

Retrenchment) 

KT        U         r  .  ^^^^  1919  1920 

JNumber  of  complete  returns g2  §2 

Capital,  surplus,  and  undivided  profits.  $281,773,403    $292,764,579    $314,480,509 
Net  taxable  mcome  as  returned  to  the 

Commissioner  of  Internal  Revenue, 

United  States 24,947,640 

^^^c^^s 471,997 

Dividends  received  from  corporations 

subject  to  Federal  income  tax 3,460, 124 

Non-taxable  interest  on  Federal  bonds.  2 ,  013 ,  899 

State  net  taxable  income* 30  284  791 

^^fi^^^s 'sS5[l25 

Franchise  tax  levied 2  817  734 

Credit  given  on  account  of  State  bonds 

^^^^•. 71,158 

Franchise  tax  paid 2  746  576 

General  property  tax 1 ,744  488 

Total  New  York  taxes 4,491064 


29,979,388 
113,890 

3,214,284 

1,784,109 

34,863,891 

2,927,645 

67,730 
2,859,915 
1,916,526 
4,776,441 


39,550,061 
2Jt2,702 

3,501,313 

1,328,241 

44,299,594 

162,681 

3,144,805 

76,346 
3,068,459 
2,024,347 
5,092,806 


pafd'^a's^'frnc^lf  [L'X^uTdti^^dd^^^^^^^^  i''  ""^'T^^  ^?^  ^'^'^  "^--^^^  the  arr-ount 

has  been  used  in  working  out  the  Ratios.  ^  ^"""^^  ^^'^  «''^^°'     '^^^  corrected  figure 


\i 


/• 
if 


135 


TABLE  Xlla 
Relation  Between  Taxes  and  Income,  Tkust  Companies  in 

New  Yoek  State 


General   property   tax   to   State   net 
taxable  income* 

Franchise  tax  to  State  net  taxable 
income 

General  property  tax  plus  franchise 
tax  to  State  net  taxable  income* . . 

General  property  tax  to  capital,  sur- 
plus and  undivided  profits 

General  property  tax  plus  franchise 
tax  to  capital,  surplus  and  undivided 
profits 

Credit  given  to  tax  levied 

Dividends  received  from  other  cor- 
porations to  State  net  taxable 
income 

Non-taxable  interest  on  Federal  bonds 
to  State  net  taxable  income 


1918 

1919 

1920 

Percentage 

Percentage 

Percentage 

5.2 

5.1 

4.3 

8.4 

7.6 

6.5 

13.6 

12.7 

10.6 

0.61 

0.65 

0.64 

1.5 

1.6 

1.6 

2.5 

2.3 

2.4 

11.4 


6.6 


9.2 


5.1 


7.8 


2.9 


*  If  net  income  before  property  taxes  have  been  deducted  is  used  as  a  base,  the  following  per- 
centages are  secured:  ^gjg         jgjg         1920 

General  property  tax  to  net  income ,'„•  ^         ion         10  3 

General  property  tax  plus  franchise  tax  to  net  income ^^  ^         *^  • " 


TABLE  XIII 

Capital,  Income,  and  Tax  Payments,  Investment  Companies 

in  New  York  State 

(Based  on  returns  to  the  Special  Joint  Legislative  Committee  on  Taxation  and 

Retrenchment) 

1918  1919                    1920 

Number  of  complete  returns 15  15                        15 

Capital $8,150,000  $8,150,000      $12,150,000 

Surplus  and  undivided  profits 2,180,654  2,358,430          3,825,619 

Total $10,330,654      $10,508,430      $15,975,619 

Net  taxable  income  as  returned  to  the 

Commissioner  of  Internal  Revenue, 

United  States 649,185  1,152,090         2,040,779 

Deficits ^0,0/,5     


136 


TABLE  XUl  — Concluded 

1918  1919  1920 
Dividends  received  from  corporations 

subject  to  Federal  income  tax 4,528  3,888  18,078 

Non-taxable  interest  on  Federal  bonds.  13,729  18,753  12,988 

State  net  taxable  income* 667,412  1,174,731  2,071,845 

I>eficits 20,015    

Tax  levied 34^031  35,809  56,481 

Credit  given  on  account  of  State  bonds 

^eld 10  50  50 

Taxpaidt 34,021  35,759  56,431 

General  property  tax 11,633  23,071  14,756 

Total  New  York  taxes  paid 45,654  58,830  71,187 

*  To  secure  a  figure  comparable  to  those  given  above  for  national  and  State  banks,  the  amount 
paid  as  a  franchise  tax  should  be  added  to  the  income  figures  here  given.  This  corrected  figure 
nas  been  used  in  working  out  the  ratios. 

t  Cf.  footnote,  table  VIII. 


TABLE  Xllla 

Relation    Between    Taxes    and    Income,    Investment 
Companies  in  ]^ew  York  State 


General  property  tax  to  State  net 
taxable  income* 

Franchise  tax  to  State  net  taxable 
income 

General  property  tax  plus  franchise 
tax  to  State  net  taxable  income .... 

General  property  tax  to  capital,  sur- 
plus and  undivided  profits 

Franchise  tax  to  capital,  surplus  and 
undivided  profits 

General  property  tax  plus  franchise 
tax  to  capital,  surplus  and  vmdivided 
profits 

Credit  given  to  franchise  tax 

Dividends  received  from  other  cor- 
porations to  State  net  taxable 
income 

Non-taxable  interest  on  Federal  bonds 
to  State  net  taxable  income 


1918 
Percentage 

1.6 

4.8 

6.5 

0.11 

0.32 


0.4 
0.0 


1919 

Percentage 

1.9 
2.9 
4.9 

0.22 
0.3 


0.5 
0.0 


1920 
Percentage 

.7 

2.7 

3.4 

0.1 

0.3 


0.4 
0.0 


0.67 
2.2 


0.33 
1.6 


0.87 
0.6 


*  If  net  income  before  property  taxes  have  been  deducted  is  used  as  a  base,  the  following  oer- 
centages  are  secured:  ^ 


General  property  tax  to  net  income 

General  property  tax  plus  franchise  tax  to  net  income. 


1918         1919         1920 
1.6  1.9  .7 

6.4  4.8  3.3 


^> 


137 


TABLE  XIV 
Surplus,   Income,   and    Tax  Payments,    Savings   Banks   in 

!N^Ew  York  State 

(Based  on  returns  to  the  Special  Joint  Legislative  Committee  on  Taxation  and 

Retrenchment) 

1918  1919  1920 

Number  of  complete  returns 135  135  135 

Surplus  and  undivided  profits $144,780,305  $147,036,336  $98,080,640 

Net  earnings  (as  defined  in  New  York 

Banking  Law) 84,203,342  91,556,330  105,510,976 

Dividends  paid  to  depositors 72,265,327  78,336,727  85,971,196 

Net  earnings  over  expenses  and  divi- 
dends*                                     14,274,279  16,920,404  23,275,379 

Franchise' tax  levied 1,447,803  1,470,363  980,806 

Credit  given  on  account  of  State  bonds 

held                                    183,512  184,892  188,929 

Taxpaid 1,264,291  1,285,471  791,877 

Property  tax  paid SS7,Q05 

*  To  secure  a  figure  comparable  to  those  given  above  for  national  and  State  banks,  the  a^^o'^o* 
paid  as  a  franchise  tax  should  be  added  to  the  net  earnings  figures  here  given.  This  corrected 
figure  has  been  used  in  working  out  the  ratios. 


TABLE  XlVa 
Relation  Between  Taxes  and  ^et  Earnings,  Savings  Banks 

IN  !N'ew  York  State 

1918  1919  1920 
Percentage   Percentage   Percentage 
General  property  tax  to  net  earnings  over  ex- 
penses and  dividends* 

Franchise  tax  to  net  earnings  over  expenses  and 

divi  lends 

General  property  tax  plus  franchise  tax  to  net 

earnings  over  expenses  and  dividends* 

Credit  given  to  franchise  tax  levied 


8.1 


12.6 


7.0 


12.5 


3.7 
3.3 

7.0 

19.3 


♦  If  net  earnings  before  property  taxes  have  been  deducted  is  used  as  a  base,  the  foUowing  per- 
centages are  secured:  jg20 


General  property  tax  to  net  earnings  over  expenses  and  dividends •  • . 

General  property  tax  plus  franchise  tax  to  net  earnings  over  expenses  and  dividends. 


3.6 
6.8 


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TABLE  XIX 
Pavim  Costs  of  Electric  Railways,  1911-1920 

re^Jettee'SSt'a^s^of  ^^^^  ^^«  ■'-'  'T^»^<i  "^  "  committee 

The  fet  table  rdates  to  theleXanies^^^e^d^TtL"?^^^^^  *^«°'- 

The  figures  m  the  second  table  annlv  tn^llriA;^^     i  ^^^^^^t^^ee  s  investigations, 
table  presents  the  total  coststr%re^^^^^^  ^^°^P^--'  -^e  the  third 

chJrgL'i^n^t:  saTerteS?'  ^thTaTeV^^t^'^  ^  T^^^^  *^^*  ^^^  P-^^ 
ference  of  opinion  as  to  S^eal^  LorS.  cha^^^^^^^^^^  «^-?g  ^if? 

charges  are  clearly  expenses  properly  cEeaWe  to  th.  ^'''^'^•''  ^*  '^^f  °^  *^^«^ 
damage  to  the  paving  because  ofihl  ^rlf  r  .u  *^^  companies  to  offset  actual 
line  between  such  exposes  and  the  DorHon  nf.i?^  *^'  ^'^'K  ^^^  ^'^'^'^  dividing 
the  nature  of  a  tax  irprimarHv  an  ^nJT  ^   *^^  l^^y^^^t  which  is  economicaUy  of 

open  legislative  hearinSTwLh  thlZT^^J'"'^^''^'  ^""V'  ^  P^^P^^  subject  for 
submit  their  views.)  '''^^  engineers  may  have  an  opportunity  to 

A~Paving  Costs  of  56  Companies 
1911-1920 

Amounts  chargeable  for  paving 

To^  To  ' 

Year  ended  June  30,  191 1  capital        maintenance  Total 

Year  ended  June  30,  1912.'  ." $601 ,273  $323,039  .  $904  310 

Year  ended  June  30,  1913        44o,768  422,824  868  W2 

Year  ended  June  30  1914 .'  .' ,   814,937  419  512  1 ,234449 

Year  ended  June  30.  1915.  .    1.320,735  485,851  1  806  586 

Year  ended  June  30,  1916. 90?'658  357,902  1  266  558 

vi"  """""i^^^^^"^  December  SI,  1916 Int'^l^.  319,619  1  054.235 

Year  ended  December  31,  1917             fS^-^OO  182,509  685  709 

Year  ended  December  31   1918" ^^1 .626  375  369  1.046  895 

Year  ended  December  31    1919 fZJ'f^  362,515  739  969 

Year  ended  December  31.  1920.    .' ^71 , 439  466 ,  208  837 .647 

Tot^                                              _  282.494  837,800  1,120,294 

nornrr^'     ■ _J7.032,198     $4,553,048      $11,585,246 

Uy  v^ompanies  report  no  paving  charges.)  "  ' '    ''^^=^=    


143 


TABLE  XIX  — Continued 

C  —  Paving  Costs  0/  91  Companies 
1911-1920 

Amounts  chargeable  for  paving 

To  To 

\                                                                                          Capital      Maintenance  Total 

Year  ended  June  30.  1911 *???'2?j            ^1%1'fA  *}'St'fi?? 

Year  ended  June  30,  1912 ,   H'So           i   lll'llt  '      i'fiS'sfiS 

Year  ended  June  30.  1913 ^ '224,209           M32.659  2.656,868 

Year  ended  June  30,  1914 ^>WA^l           J'S?'?lt  ?'5J?'??! 

Year  ended  June  30,  1915 1'332.579            1'461,635  2,794,214 

Year  ended  June  30,  1916 908,562           1.373.777  2,282.339 

Six  months  ended  December  31,  1916 ^|f '281                617,614  1 ,261 ,895 

Year  ended  December  31,  1917 ?31,556            I'gJM^S  ?,2??'?f| 

Year  ended  December  31,  1918 480,578               9^8,559  J '4*9, 137 

Year  ended  December  31,  1919 483.524           1-420.326  1 .903,8^0 

Year  ended  December  31,  1920 359.121           1.878.064  2.237.185 

Total $9,697,886      $13,787,509  $23.485.395 


(31  companies  report  no  paving  charges.) 


II 


■   1 


TABLE  XIX  — Continued 

B  — Paving  Costs  of  35  Companies 
1911-1920 

Amounts  chargeable  for  paving 

T^                    T^  ^ 

Year  ended  June  30,  1911                                                             capital        maintenance  Total 

Year  ended  June  30.  1912   $228,088        $442,432  $670  "ion 

Year  ended  June  30   1913 291 .309           515  790  SOim^ 

Year  ended  June  30!  1914 409.272       1.013.147  1  422419 

Yearended  June  30,  1915. !^^''^03       1.367.063  1.'813  366 

Year  ended  June  30.  1916:;:: ??3,923       1.103.733  1  H27  656 

Six  months  ended  December  31.  1916 JI?  '^1?       1 ,  054 ,  158  1 ,  228 !  104 

Year  ended  December  31.  1917             l^h^^^           435.105  576  186 

Year  ended  December  31    1918 ?^^^30           702.607  962  537 

Year  ended  December  31    1919 103.124           606.044  709  168 

Year  ended  December  31.  1920:  '.'.W U?'2o^       ,   9.54. 118  1 ,066;203 

Tot^                   ^^'6^^   ^'040,264  1.116.891 

,,„^ ; »2. 665. 688  $9.234,461  $11,900,149 

U^  <^ompames  report  no  paving  charges.)                                        =====  - 


Date  Due 


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